Who Can Cut More Jobs: InBev or Anheuser-Busch?

Any jobs InBev can cut, Anheuser-Busch can cut better.

That seems to be the message from Anheuser-Busch’s announcement today of plans for $1 billion in cost cuts, including the elimination of 1,290 jobs.

This may appear to be something of a counterintuitive move. After all, one of the common objections of Anheuser-Busch employees and Missouri politicians to InBev’s $46.35 billion takeover bid is that the Belgian-Brazilian brewer would slash away at A-B’s 12 breweries and with it, employee headcount. InBev took those concerns so seriously that CEO Carlos Brito has sought to reassure A-B stakeholders in letters, conference calls and an Op-Ed piece in the St. Louis Post-Dispatch.

So is A-B trying to fend off the hostile deal by putting a gun to its own head and yelling, “stop or I’ll shoot”?

People familiar with A-B’s thinking said the company believes it is essentially kicking out legs of the stool that is holding up the InBev bid. InBev is promising shareholders it can deliver cost savings on the deal. No number has been confirmed, but the one frequently kicked around is $1.3 billion. But A-B feels that what it can do better is quickly find
where to make the job cuts; the brewer is expanding its Blue Ocean initiative with these cuts. “InBev will do surgery with a sledgehammer,” said a person close to A-B.

InBev declared war in the hostile deal on Thursday; a day later, A-B declared war right back.

The success of A-B’s plan hinges on a couple of things. The most important is whether investors and InBev find it convincing. Workers who argued for an independent company probably wanted to keep their jobs. A-B also has to convince people that this time around, it will work. After all, as Wall Street Journal colleague David Kesmodel pointed out, “The U.S. giant’s shares languished in the $50 range for about five years before rumors of
InBev’s takeover plans surfaced this spring.” So if A-B knew how and where to cut to be more efficient, why didn’t it do it earlier, rather than only in response to InBev?

One thing that A-B absolutely wants to dispel is any impression that the brewer is a family-run cabal. The company’s executives stressed on a conference call today that the board has several independent directors, and CEO August Busch IV tried to play down the influence of his father, Busch III, who is also a director. Said Busch IV to Kesmodel: “He’s a board member and he had his opinions, and they were opinions that were
rooted in good governance and doing his fiduciary duty and doing what’s right for our shareholders.”

Of course, all of the cost-cutting talk only gets A-B part of the way there. (And in fact, the brewer also announced plans to grow revenues by 4%). The other big sell the brewer has to make is convincing shareholders to accept $1 billion in cost cuts instead of $65 a share in cash.

Update: We added a link to mention Blue Ocean and A-B’s plans to grow revenues.