Bud brewers prepare to fend off InBev

Anheuser-Busch Cos. plans to cut pension and health care benefits for its salaried employees as part of an effort to slash $1 billion in costs by the end of 2010 and fend off an unsolicited $46 billion bid from Belgian brewer InBev.

The biggest U.S. brewery laid out its benefit-cut plan in a memo sent to salaried employees Friday morning and provided to The Associated Press by the company Monday.

The memo says employees' individual, lump sum payouts under the pension plan will be reduced by approximately 5 percent to 6 percent in 2009 and approximately 15 percent by 2012. Workers also will make a bigger contribution to their health insurance plan, rising from approximately 21 percent today to 25 percent of the cost beginning in 2009.

"The economic picture has been changing over the past months for all businesses, with sharp increases in costs. For Anheuser-Busch to remain competitive, we are introducing several initiatives in an expanded Blue Ocean (cost cutting) effort that will enhance our profitability," Anheuser-Busch Vice President of Human Resources Tim Farrell said in the memo.

The cost-cutting plan — dubbed Blue Ocean by the company — is part of Anheuser-Busch's effort to stop InBev's takeover effort. InBev's offer amounts to $65 a share, which is a steep premium over Anheuser-Busch's stock price of roughly $50 a share before speculation about the InBev offer was reported by media outlets.

Anheuser-Busch's board of directors rejected InBev's offer last week, saying the price undervalued the company. The same day, InBev filed a lawsuit in Delaware, where Anheuser-Busch is incorporated, seeking to officially declare that shareholders can remove all 13 members of Anheuser-Busch's board. Such a declaration could be the first step to rally Anheuser-Busch shareholders to accept InBev's offer, even if management is opposed to it.

Anheuser-Busch executives laid out a detailed plan Friday to boost the stock price to $65 a share and beyond, without InBev's intervention. The effort includes an early retirement plan it will offer to salaried employees in the third quarter. Of the 8,600 employees eligible for the program, including 1,300 who are 55 and older, the company expects 10 percent to 15 percent will accept the plan.

The maker of Budweiser and Bud Light also said it is increasing its 2008 share repurchase plan to $3 billion from $2 billion and plans for $4 billion in repurchases in 2009. Anheuser-Busch will take a $300 million to $400 million charge related to the retirement plan in the fourth quarter.

The plan has the potential to raise Anheuser-Busch's value to $66 or more a share, but that doesn't mean shareholders will go for the deal, said Stifel, Nicolaus and Co. analysts Mark Swartzberg and Mark Astrachan. That's because InBev is ready to pay $65 a share in cash immediately.