Anheuser-Busch has tried all the usual tactics to defend itself against the unwanted $46.3 billion takeover bid by InBev NV, but now it has resorted to more inventive means.

The brewer of the iconic American beer, Budweiser, has sued InBev and called the Belgian’s beer company’s takeover attempt an “illegal plan and scheme” to acquire Anheuser “at a bargain price.” Translation? How dare those European barbarians practice good old American style capitalism?!!

Anheuser-Busch also accused InBev of “a course of deceptive conduct” and asked for an injunction to stop InBev’s efforts to remove Anheuser-Busch’s board until certain false and misleading statements were fixed. InBev could not be immediately reached for comment.

The lawsuit said InBev has failed to disclose information about its Cuban business and how that would impact its promise to keep the combined company’s North American headquarters in St. Louis.

Anheuser-Busch on Monday had bashed InBev for its ties to Cuba. InBev has a subsidiary that partners with the government of Cuba to produce and distribute Bucanero, Bucanero Malta, Bucanero Max, Cristal and Mayabe brand beers.

InBev said its volume of beer sold in Cuba constitute less than 1/2 of 1 percent of its total global volumes. The Belgian brewer also said its Cuban business does not violate U.S., EU or international law, and it would continue to comply with those laws if it were to successfully acquire Anheuser-Busch.

So, what’s next?

Anheuser-Busch has said that InBev’s $65 per share offer was too low. But it still represents a premium to where BUD’s stock price now trades. In May, one of Anheuser-Busch’s own financial advisers, Goldman Sachs, reaffirmed its 12-month price target of $49 on BUD’s stock.

It also said InBev’s proposed nominees to replace Anheuser-Busch board was a self-serving effort. Anheuser-Busch said “shareholders should ask themselves whether the directors selected by InBev would negotiate the best transaction for Anheuser-Busch shareholders.” One of InBev’s nominees is Adolphus Busch IV, the uncle of Anheuser-Busch’s current CEO and a BUD shareholder.

Anheuser-Busch also said its own plans would provide better value for shareholders than InBev’s offer, but so far the company’s efforts to cut $1 billion in costs and improve earnings has failed to spark a jump in Anheuser-Busch’s stock price.

Will the sheer volume of BUD’s arguments sway shareholders its way? The jury is still out, but it’s looking doubtful so far.

Pier 1 Imports Inc finally came to its senses and dropped its much-criticized bid for Cost Plus Inc, prompting a nearly 12-percent jump in its stock price and an upgrade by an analyst.

Shares of Pier 1 surged after the home furnishings company withdrew its bid, saying it was unlikely it would be able to acquire a majority interest in Cost Plus “at a price that would make sense” for shareholders.

D.A. Davidson upgraded Pier 1 to “buy” from “neutral” after the news. Since revealing its bid on June 9, Pier 1’s stock had plunged 23 percent through Tuesday.

“Management can now begin to move from defending an ill-timed and ill-orchestrated action to continuing to focus on its turnaround,” Raymond James analyst Budd Bugatch said in a research note. “More importantly, it can begin rebuilding its credibility that was unfortunately damaged by this affair.”

Pier 1’s $88.4 million all-stock bid was slammed by analysts who said it would distract Pier 1 as it was seeking to turn around its own business. The operator of Cost Plus World Markets rejected Pier 1’s proposal, saying it was not attractive financially or strategically.

D.A. Davidson upgraded Pier 1 to “buy” from “neutral” after Pier 1 withdrew its bid.

While the M&A market has seen a surge in big-brand strategic dealmaking — ranging from the merger of Mars and Wrigley, to Hewlett-Packard and EDS, and InBev’s bid for Anheuser-Busch — there have been a few flailing attempts, too.

“There are companies that are less-well positioned and less likely to prosper making unsolicited or hostile bids for even weaker companies. These are companies that are sucking wind that are just trying to buy revenues and amass something larger just to hang on,” said one head of mergers and acquisitions at a U.S. investment bank.

Now, when will Blockbuster Inc come to its senses and walk away from its offer for Circuit City Stores Inc? Shares of Blockbuster rose nearly 13 percent on Tuesday amid investor speculation that the movie rental company’s offer for Circuit City may be dropped. It rose another 3.8 percent on Wednesday.

Circuit City posted a wider-than-expected quarterly loss last week and said its cash position fell to $92.2 million from $364.1 million a year earlier. Yet, Circuit City investor Mark Wattles told Reuters on Tuesday that Circuit City has received buyout interest from several strategic and financial bidders and a sales agreement could be announced over the next month.

Investors seem to be hoping that Blockbuster isn’t one of them.

InBev NV hesitated on Wednesday to put an expiration date on its $46.3 billion offer for Anheuser-Busch Cos Inc, but hinted that its bid may not have an indefinite shelf life.

The Belgian brewer reminded Anheuser-Busch that “time is of the essence” for the offer and that it remains available to discuss its $65 per share offer. InBev said it had commitment letters for the deal’s financing from 10 banks, so it’s ready to pull the trigger on a deal at any time.

Without putting a definitive walk-away date on the offer, InBev kept its friendly demeanor. But the reminder makes clear that its interest in a cold Bud may not last forever.

Anheuser-Busch’s board of directors met last week to discuss the proposal, which would be the third-largest foreign takeover of a U.S. company ever. Yet, the maker of Budweiser and Michelob has yet to respond to the bid.

There’s only so long that Anheuser-Busch can utter the usual clichés that it will review the bid thoroughly and respond in due course before InBev, and even BUD shareholders, get impatient.

Although Anheuser-Busch has few takeover defenses to thwart a hostile bid, it may be difficult for InBev to bring the heat to the all-American beer, with politicians putting in their two cents and the possibility of union and employee resistance. Will it risk a hostile offer or look for another target?

Warren Buffett, who owns about 5 percent Anheuser-Busch, said the takeover saga remains an “interesting spectator sport.” For now, at least.

Bankruptcy is better than a merger. Or that’s what U.S. airlines seem to think.

Almost every U.S. legacy carrier has been through a bankruptcy at some point; many have been through Chapter 11 twice.

And things, once again, are turbulent.

After racking up $35 billion in losses and finally emerging from a five-year slump in 2006, you would think the major carriers, suffering partly due to the threat of low-cost competition, would see the sense in consolidating.

Two of them did. Delta and Northwest said in April they would merge to create the world’s largest airline.

You would think more talks would follow. They did. You would think more mergers would follow. They didn’t.

Merger talks between United Airlines and Continental Airlines picked up steam after the Delta-Northwest deal. Continental pulled away, and the talks died.

Then, merger talks between United Airlines and US Airways picked up steam. The airlines have now decided not to merge amid concerns about labor opposition and integration costs.

But the industry is expected to lose $7.2 billion this year. Oil prices have hit all-time highs, roughly doubling in the past year. United CEO Glenn Tilton sees the fuel bill for U.S. airlines going up by $20 billion this year. Some airlines are raising fares and charging passengers for one checked bag. Let’s face it — times are bad. In fact, times are terrible. 

Still, they refuse to consolidate. Perhaps bankruptcy is easier? In bankruptcy, they’re off the hook for plane leases and labor contracts. In fact, in many ways, it’s the best time for them to merge.

And, unlike the auto industry, where a bankruptcy would be brutal for sales, airlines operate just fine during Chapter 11. Air tickets don’t need a warranty of any sort, and many passengers are usually unaware they are flying a bankrupt carrier when they travel.

In fact, seven small airlines have filed for bankruptcy or stopped operating in the past five months.

And that trend will continue unless the industry cuts capacity. Several airline executives have said there is too much capacity in the U.S. skies. And the “Open Skies” agreement, which eases barriers on Trans-Atlantic travel, will only increase capacity. As more foreign arilines will come into the United States, they will increase competition and lower prices.

For now, the airlines may think they can stick together and raise prices like one big, happy family. But ultimately, if oil stays where it is and consumers get more options, the airlines could once again find themselves facing the Hobson’s choice: merger or bankruptcy. 

As the long-rumored deal between Belgian brewer InBev NV and Anheuser-Busch inched closer to reality, options traders celebrated. Some even hoped for a drawn-out battle.

Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut noted that Friday’s surge in Anheuser Busch’s share price indicated a willingness by option investors to brace for a hostile battle if friendly negotiations falter.

“It’s becoming increasingly apparent that this would not be a straight forward collaboration between the two. It could be friendly, but there are big cultural divides between the two companies that would need to be addressed,” Wilkinson said. “The notable call activity in BUD perhaps goes straight to the heart to the matter and addressses the purported $65 price tag that is being floated in the media today.”

Investors often turn to calls, which give the right to buy the company’s shares at a given price and time, hoping to profit from share price appreciation. Late on Friday, roughly 255,000 calls compared to 40,000 puts changed hands in Anheuser Busch, nine times the normal volume, according to option analytics firm Trade Alert.

“So now option investors are snapping up June, July and September $60 calls, allowing them to buy BUD shares at a fixed cost of $60 piece, in the hopes that this may turn hostile, he said.

Wilkinson said these calls would be profitable if either of two things happen. One, investors jump on the bandwagon looking for takeover gains in Anheuser Busch shares. Secondly, a battle for control of Anheuser Busch between the existing management and InBev could easily increased the perceived volatililty of the share price.

Even if the share price stands still, a rise in its options implied volatility, a measure of uncertainty, could boost the price of the call option, Wilkinson said.

“So any continued rise in Anheuser Busch shares, particularly coupled with a rise in its projected volatility, would be a double whammy for option traders.”

(Reporting by Doris Frankel in Chicago)

After a year of exploring strategic options and many rounds of back-and-forth rancor with billionaire investor Nelson Peltz, the resolution of the $2.4 billion deal came during one frenzied final week when the threat of a rival suitor became real, sources familiar with the situation said.

The No. 3 hamburger chain began exploring strategic options last April and formally began searching for a buyer in June instead of pursuing other restructuring options. The talks with Peltz, who owned 9.8 percent of Wendy’s, seemed dead last week after the fast-food chain rejected two of his proposals as too low.

What a difference a week makes. Wendy’s had started earnest talks with a private equity firm after Peltz said he would call a special meeting of Wendy’s shareholders, sources said. When Peltz heard that the rival bidder was close to a deal, Peltz returned to the bargaining table, sources said. The Wall Street Journal said the rival suitor was Kelso & Co. Kelso could not be immediately reached for comment.

“When Wendy’s issues its proxy materials regarding its desperate agreement to merge with Triarc announced this morning, the ‘Background of the Merger’ section ought to be a doozy, especially considering last week’s volley of letters that disclosed that Wendy’s had turned Triarc down as recently as last week,” Carol Levenson, director of research at Gimme Credit, said in a report.

The deal valued Wendy’s at $26.78, based on Triarc’s closing stock price on Wednesday. Based on cash flow, the deal puts a price tag of about 8- to 8.5-times adjusted 2007 EBITDA on Wendy’s, which is a valuation level reminiscent of the buyout peak.

Under terms of the deal, Wendy’s shareholders would control 80 percent of the combined company, with Triarc shareholders owning the remaining 20 percent. The deal has no break-up fee.

Still, despite gaining majority control and finally quieting an activist shareholder, Wendy’s failed to fetch the $37 per share to $41 per share Peltz was prepared to offer in July. In November, Triarc’s offer fell below that level.

“The announced agreement implies a mere 6% premium to Wendy’s closing stock price, and promised merger synergies are vague as to content and the timing of realization,” Levenson said. “Apart from increasing its scale and some potential cost savings, this appears to be a credit-harming outcome for Wendy’s.”

Last year, sources told Reuters that two banks declined to fund Peltz’s bid for Wendy’s as the credit-crunch made deal-financing difficult to secure. In the end, financing was a moot issue. Triarc used all stock.

(Photo: Nelson Peltz, 2006, Reuters)

With Bear Stearns’ stock fetching only $2 a share, folks seem to be making more of a killing on souvenirs.

An EBay search for Bear Stearns returns a mix of odd items ranging from a 99-year-old magazine article about the 1909 crash ($10.49), a stuffed bear dressed in a vest and tie ($51.00),  as well a various stock certificates ($8.49 - $14.99). There are also T-shirts, windbreakers, and backpacks each priced at $2 a piece — ironic? 

For the true collector there’s a Bear Stearns cafeteria card. So far, that’s received 10 bids and now is bidding at $16.50, plus a $5 shipping fee. That is equivalent to about 4 shares of Bear stock as of Wednesday’s close.

Finally, in the true spirit of capitalism, some entrepreneur has found a way to make money out of others’ despair.  For $17.99, you can buy a T-shirt reading “I invested my life savings in Bear Stearns and all I have left is this lousy T-shirt” — perfect for anyone with a Bear employee on his or her list.

(PHOTO: Ebay website)
 

Basel, one of Switzerland’s largest cities,  is known as the home to such drugmakers as Novartis AG and Roche Holding AG, earning the old Swiss canton the unofficial moniker of ”biotech Silicon Valley.”

Increasingly the metropolis is also known as the birthplace of international capital adequacy banking accords — Basel I and Basel II.

The banking rules were devised as a one-size-fits-all capital adequacy standard for global financial institutions. However, critics are now asking if Basel II has backfired by allowing firms to lower capital requirements, leaving them in a crunch now that some investments have soured.

At issue is whether the new rules allowed some European firms — where Basel II regulations had already begun to be rolled out – to put less capital into loss reserves for highly-rated debt, including U.S. mortgage-backed securities, exacerbating a crunch that at first seemed contained in the United States.

Swiss-based UBS on Friday estimated that the credit crisis that has been roiling markets, and putting a chill into M&A markets worldwide, is far from over, forecasting losses that could exceed $600 billion globally.

Abby Joseph Cohen, chief U.S. investment strategist at Goldman Sachs speaking at a New York business conference last Thursday said, based on anecdotal evidence, it appeard that the subprime mortgage crisis had caused a higher degree of problems for non-U.S. financial firms.

 The write-downs that European financial institutions have had to take on bad U.S. mortgage debt was something that Cohen attributed to Basel II, as the regulations gave firms some wriggle room when it came to putting up capital for top-rated securities.

The snag? ”The ratings were wrong,” said Joseph Cohen, who added it was not yet clear how the crisis will play out. “The final chapter has not been written,” she said.

In the meantime, Basel II’s potential flaw is starting to get a lot of attention. “Mortgage fallout exposes holes in new bank-risk rules” read a page 1 story in Tuesday’s Wall Street Journal. And an earlier Financial Times op-ed was titled “Turmoil reveals the inadequacy of Basel II.”

 Federal Reserve Vice Chairman Donald Kohn stepped up to defend Basel II  on Tuesday, calling the rules an “important step forward to make capital requirements more risk sensitive.”

But if critics of Basel II are on to something, Basel – which is also home to UBS, the European bank hardest hit by the credit crisis – could find itself with a bad headache, one that none of its drug firms are likely to have a cure for.       
     

(Photo: Firefighters in Basel watch as a burning wooden wagon passes the old city tower of Liestal during a festival. Source: Reuters, 10 February 2008)
  

Talk about an after-Christmas sale.

Restoration Hardware Inc. accepted 33-percent less than originally planned for a management-led buyout that included private equity firm Catterton Partners. Back in November, the retailer accepted a $6.70 a share, or $267 million takeover bid from Catterton.

That was just the beginning. Later that month,  Sears offered to buy the company for $6.75 a share.

That was before the global equity markets selloff that kicked off the year, as well as evidence that the deepening housing slump was pushing the U.S. economy into recession. 

Today the home furnishings chain agreed to a new bid from Catterton that values the company at $4.50 a share, or about $175 million.

But at least it got a $25 million loan for working capital, the chance to solicit other bids through February 28 and firmer commitments that the deal would close even if the retailer’s operating results weaken.

Restoration Hardware said in a filing with the U.S. Securities and Exchange Commission that there was no assurance that any other company — including Sears — would submit a better proposal. Sears declined to comment.

In a letter to employees that was addressed to “Team Resto,” Restoration Hardware Chief Executive Gary Friedman said the lower deal price was “primarily due to continuing macroeconomic pressures and the difficult environment for home furnishings retailers, which has affected financial performance across our industry.” He signed the letter “Carpe Diem.”

Restoration Hardware recently said that sales for the nine-week holiday period ended January 5 — normally the biggest season for retailers — totaled $171.5 million. That marked a drop of 1 percent for the 2007 holiday season, compared with a 22 percent increase in sales during the 2006 holiday season.

The retailer said seasonal sales it had anticipated in gift items during the final days of the holiday shopping season did not materialize, which added to softness in its “decorative accessories business.”

Carpe diem. Seize the sale.

Shares of struggling electronics retailer Circuit City Stores Inc. surged 21 percent on Tuesday on news that Hollywood Entertainment Corp founder Mark Wattles acquired a 6.5 percent stake.

Wattles acquired the stake in Circuit City for investment purposes and may buy additional shares, encourage the company to enter a merger, or nominate candidates for the board, according to a filing with the U.S. Securities and Exchange Commission.

The interest in Circuit City, which suffered from lower sales in December — the peak season for most retailers — comes after Wattles filed for a “blank check IPO” in December. The blank check company filed to raise up to $200 million “to focus on potential acquisition targets in the consumer products and retail industry,” the filing said.

Wattles sold Hollywood Entertainment to Movie Gallery in 2005 and owns 32 stores of the Ultimate Electronics Stores chain. Movie Gallery, the second-largest U.S. video rental chain, filed for Chapter 11 bankruptcy in October. In December, Wattles was listed as a potential investor in a reorganization plan for Movie Gallery, according to media reports.

Maybe Wattles’ attention has now shifted to Circuit City? Wattles and his affiliated companies acquired 11 million shares of Circuit City, according to the SEC filing. Wattles met with Circuit City management before acquiring the stock, the filing said.

Circuit City said December same-store sales — or sales at established stores — dropped 11.4 percent. That compared with a 1.5 percent rise in same-store sales at rival Best Buy.

Circuit City’s weak December sales, expected fourth-quarter loss and weak stock price prompted some analysts to label the retailer as a likely takeover target. Wattles’ SEC filing just added a bit to those hopes.

Earlier this month, Classic Fund Management Aktiengesellschaft, a Liechtenstein-based asset management company, disclosed it holds a 5.7 percent passive stake in Circuit City.

Circuit City could not be immediately reached for comment.

(Photo: Reuters/Steve Marcus)