Bud Suitor Famously Frugal

InBev, the Belgian-Brazilian brewer bent on acquiring Budweiser brewer Anheuser Bush, has a reputation for belt-tightening that makes some U.S. penny-pinchers look like spendthrifts.

In fact, InBev says it can squeeze as much as $1.4 billion in costs out of Anheuser if it is successful in the deal, according to a report by Reuters. That might be good news for Anheuser shareholders who would stand to gain from the added synergies of the deal. But it could be one more reason for the company's management to continue to oppose the deal.

"InBev’s announced attempt to seek to replace Anheuser-Busch’s existing board of directors with InBev’s hand-picked nominees is a self‑serving effort by InBev to try to purchase Anheuser‑Busch for a price Anheuser‑Busch’s independent board already has determined to be financially inadequate and not in the best interest of shareholders."

According to the Reuters report, InBev practices "zero-based budgeting," a process in which departments are forced to justify their entire budgets each cycle, not just annual increases. Employees describe stingy practices such as enforcing double-sided printing and requiring employees to repeatedly validate their need for mobile phones. The plan extends to water-saving and other conservation methods in the brewery.

Such frugal ways extend to the C-suite with executives often flying economy and restrictions of areas of travel. With some shareholders already worried that the family controlled management might not be looking out for their best interest, such tales of brutal cost-cutting could have the effect of widening the gap. Presumably, Anheuser management would rather avoid having to take a sharp ax to its U.S. operations.

Meanwhile, both sides are digging in. Earlier this week Anheuser sued InBev to try to tie up the brewer's bid to takeover Anheuser. In the lawsuit, the maker of Budweiser beer cited "an illegal plan and scheme by InBev, through a course of deceptive conduct, to acquire control of Anheuser-Busch at a bargain price."

"InBev’s announced attempt to seek to replace Anheuser-Busch’s existing board of directors with InBev’s hand-picked nominees is a self‑serving effort by InBev to try to purchase Anheuser‑Busch for a price Anheuser‑Busch’s independent board already has determined to be financially inadequate and not in the best interest of shareholders," the company said in a statement.
 

On Monday, July 7, InBev announced plans to replace the Anheuser board. Stay tuned this one is likely to get uglier on both sides before any conclusion is achieved.