Dozens of people close to both Anheuser-Busch and InBev spent as much as 10 hours apiece with me as I worked to form the structure of this story and to flesh out its intimate details. Some were happy to speak on the record, while others weren’t comfortable seeing their names in print. I’m grateful to them all for the generous donation of their time and for their enthusiasm about the subject matter. On the way to my hotel from the St. Louis airport, my cab driver even offered to escort me to a section of the perimeter of Grant’s Farm, the Busch family’s ancestral country estate, where she had heard the security was weak. The popular local attraction had just closed for the season when I hit town, but she said I could probably sneak in if I wanted to. I thanked her for her creativity and her eager complicity but politely declined.
My timing was slightly off in another respect as well, since I began researching this book while three months pregnant with my first child. Pregnancy and beer don’t exactly mesh—not in American culture, at least—and I wondered how many glasses of cranberry juice I’d end up swigging as brewing executives and bankers invited me to meet them at bars once they finished up at the office. I was playing against type to begin with, as a young(ish) pregnant woman writing a book about the hostile takeover of a male-dominated brewer. I’d covered other macho topics in my career as a journalist, though, including automotive companies and the futures markets in Chicago. If you can hack it as a woman on the floor of the Chicago Mercantile Exchange, I rationalized, you can certainly stay afloat at the Anheuser-Busch brewery in St. Louis. I quickly found that my pregnancy helped humanize me to some of my more cautious sources. It made me seem more relatable. And since the saying goes that writing a book is the next-closest thing to having a baby, I suppose I’ve nearly had two. This book was a labor of love that burgeoned on both U.S. coasts. I first put pen to paper in a rented office in Manhattan’s Financial District, right across Broad Street from the headquarters of Goldman Sachs. I penned the book’s last few sentences three blocks from the ocean in Santa Monica, California, after moving across the country with my husband when I was eight months along, cartons of clippings and notes in tow.
It’s easy to deal in superlatives when it comes to Anheuser-Busch, and the company gladly reinforced that image. It brewed the country’s favorite beer; its former chief, August III, was the most powerful brewer in the world; and its top staffers enjoyed only the best—sumptuous hotels, private jets laden with free Budweiser, and ritualistic gatherings studded with movie stars. Anheuser-Busch dubbed its flagship brand the “King of Beers” and spent more than half a billion dollars on marketing each year to make sure it became, and remained, an American institution.
The hostile takeover of Anheuser-Busch, which InBev attempted to make look friendly in the end, added two more superlatives to the pile. It represented the largest all-cash acquisition in history, and it marked the last giant merger that was inked before the global financial markets imploded. There were already indications that disaster loomed by the time the two companies first came together, and both sides made savvy moves that kept the deal alive when September hit and banks started collapsing around the world. Merger activity had already plunged by then, and people who depended on big deals to stay busy at work were stuck watching the boring tennis match of barbs slung back and forth between Microsoft and its failed takeover target, Yahoo!
I ended up growing quite attached to some of this book’s characters—even the ones I never had a chance to meet. Some were loyal to Anheuser-Busch, where one man’s imposing views made life seem black-and-white for decades, while others were tied to the stark, competitive InBev, where the bottom line always dictates. After living and breathing each of these people every day for a year, though, it became impossible not to see even their most indefensible actions in a dozen shades of gray. When two companies that are as diametrically different as Anheuser-Busch and InBev are driven together, even the most simple relationships and decisions—even histories and legacies that have already been written—can quickly grow messy and complicated.
Prologue
They don’t care what I think anymore.
—August Busch III
Some men golf when they’re looking to unwind. Others take their sports cars out for a drive or toss a few steaks on the grill. August A. Busch III liked to shoot things—ducks in the fall and quail in the winter.
He learned to love hunting from his father, who learned it from his father, and when he could take time away from the office, he would invite important guests to join him for a day of stalking waterfowl. He was a powerful man during the three decades when he ran Anheuser-Busch—powerful enough to compel some of his weaker-stomached subordinates to trudge into the marshes behind him, even though they’d have preferred throwing breadcrumbs to the birds rather than killing them.
The sun was slowly setting on August III’s career in the early spring of 2007, when he and several Anheuser-Busch executives flew down to a plantation in Leon County, in northern Florida’s Panhandle region, to hunt quail. He had retired as Anheuser’s chief executive four-and-a-half years prior, had just stepped down as chairman, and now, with his son August IV newly in charge, retained only his position as a member of the company’s board of directors. He was the most influential member of that group by far, but the transition to his son’s regime had been messy and contentious, and August III was feeling marginalized.
The hunting group was eager to blow off some steam that year following the all-important Super Bowl football game. Everything had gone according to plan for Anheuser-Busch: More than 93 million viewers tuned in on February 4 to watch the spectacle, college—turned-NFL phenomenon Peyton Manning was named its most valuable player, and for a record ninth year in a row, an Anheuser-Busch advertisement won the USA Today Ad Meter poll that ranks consumers’ favorite commercials. With their reign still firmly entrenched—thanks to an ad featuring beach crabs that worshipped in front of a Budweiser-filled cooler—the company’s crack team of marketers breathed a sigh of relief.
That moment of respite was brief, however, for August A. Busch IV. He had only been running the company for a few months, and his father took issue right from the start with some of his decisions. August III wasn’t the type to quietly voice his displeasure. He had torn so ferociously into his son that it had created an uncomfortable dynamic on the company’s board of directors. He didn’t approve of the alliances his son was striking with other companies, and he thought his new practice of inviting Wall Street bankers into confidential meetings was foolish. Anheuser-Busch had built itself from the ground up over the course of a century and a half. It didn’t need to ink risky merger deals and rub elbows with fee-hungry bankers to survive.
As the group of hunting companions emerged from their bedrooms the morning after their arrival in Florida and prepared to head outside, a racket erupted from the plantation’s formidable great room. August III, who had been using his cell phone to check in on things at the office, had hung up and exploded into a full-blown rage, ranting at no one in particular in front of the room’s giant picture window and its view of the lake below. As the decibel level of his voice boomed higher and higher, it became apparent that his fury was fixated on two things: a beer distributing partnership the company had recently signed with foreign rival InBev, and his son’s decision to invite a bunch of bankers down to an internal strategy session he had organized in Mexico just a week or two earlier.
Anheuser-Busch had been operating in a state of fear for months—everyone knew it was vulnerable to a takeover. By jumping into bed with the aggressive and growth-hungry InBev, even just on a deal to distribute its beers in the United States, he felt his son was asking for trouble.
“They’ve gone ahead and done this deal,” fumed August III, who had strenuously opposed the joint venture. Anheuser-Busch was slipping out of his control, even with his own namesake in charge. “We’re running scared, and here we are now doing a deal with these guys. We’ve let them inside the tent!” His hun
ting guests stared uncomfortably at their shoes, toeing the carpet, as the plantation’s wait staff looked on in astonishment from the kitchen.
August III then shifted tack and blasted his son’s courtship of Wall Street. By stocking what should have been a private meeting in Mexico with so many bankers, who had connections not just to each other but also to Anheuser’s competitors and investors and the media, August IV had chummed the waters in a way that was bound to attract sharks, he contended. His protestations were so forceful that it seemed they would be heard in nearby Tallahassee, where his daughter and her husband ran a beer distributorship.
The last time August III had become so unglued over a threat to Anheuser-Busch had been in 1991, when President George H.W. Bush violated his “no new taxes” pledge and raised the excise tax on alcohol. August III thought he had played all his cards right: It was a Republican administration, one Busch family knew the other set of Bushes, and he and George W. Bush, the president’s son, had even owned Major League baseball teams together. Those connections still weren’t enough to keep the president from doubling the tax on a six-pack of beer overnight.
“All you did by bringing those bankers in there was send a telegraph wire out to InBev that you’re ready to be taken over,” August III snapped that day in the plantation house, turning in contempt toward the executives who stood off to the side to distribute some of the blame.
“You’re putting up a FOR SALE sign. You’re giving away too much information. All you did was get everybody in the world to sharpen their knives!”
He finally cooled off enough to head into the plantation’s private reserve for the hunt, but the tirade had unnerved the group. They were already concerned that Anheuser-Busch had been left behind as its rivals ballooned in size. Life had been tense at headquarters for months, and everything came into stark relief that morning when they saw the worry and fear that flashed across August III’s face.
“His point was that this is the beginning of the end, because now you guys opened Pandora’s Box,” said one member of the hunting group. “So while we thought maybe we were doing our due diligence, and I’m sure companies do this all the time, he said, ‘You guys just brought this on yourselves.’ ”
Chapter 1
The Game Is Afoot
There’s a shark in the water, and the shark is InBev.
—Anheuser-Busch executive
Wednesday, June 11, 2008, was forecast to be hot and sticky in St. Louis, with afternoon temperatures rising well above 80 degrees. None of the Anheuser-Busch executives who pulled into the parking lot of the soccer park in Fenton that morning expected to see much sunlight for the next 48 hours, however. After several decades of overpowering domination of the U.S. beer market, and a history of independence that stretched back more than 150 years, the company was under attack.
Anheuser’s top staffers met often at the soccer park, one of several sites the company owned that were scattered around St. Louis. The Busch name was plastered all over town, in fact, on everything from the beer billboards that lined the city’s highways and bus shelters to the plaques that marked some of its best-loved recreational sites. The St. Louis Cardinals professional baseball team had called Busch Stadium home since 1953. Parents had been shuttling children for years to Grant’s Farm, the Busch family ancestral home turned free-admission zoo. Students at St. Louis University congregated at the Busch Student Center, and visitors to the August A. Busch Conservation Nature Center in St. Charles, just outside the city, could even blast shotguns at the August A. Busch Shooting Range.
Less than three weeks earlier, the newspapers had picked up on something that prompted Anheuser-Busch to draw its own arsenal. Global beer giant InBev, the papers said, was preparing to lay siege to Anheuser with an unwanted $46.3 billion takeover bid.
Nothing was clear yet; InBev hadn’t actually made a formal offer. The concept alone, however—and the fact that details in the newspaper reports were so explicit—set people afire at Anheuser’s headquarters. Few companies on earth were more evocative of America, with all of its history and iconography, than Anheuser-Busch. Despite the forces working against it, from brewing rivals to alcohol tax - wielding politicians, the company had somehow made itself—and its key brand, Budweiser—as ubiquitous a part of American life as firecrackers and apple pie. If InBev decided to pounce and its takeover effort was successful, the glittering shrines Anheuser had built to itself in St. Louis could come crashing down, along with its supremacy as America’s beer brewer of choice.
Most of America seemed to have never even heard of InBev. The company had grown from a tiny Brazilian brewing outfit into a globe-spanning megalith in an incredibly short period of time by normal business standards. InBev was now based in Belgium, but it was run by an intense, hard-charging group of Brazilians who had consistently gotten what they wanted as they pushed their company further and further up the list of global corporate powers. There could hardly be a more dramatic counterpoint to the gold-plated, history-laden Anheuser-Busch than cold, number-crunching InBev.
Arrogance and denial made some Anheuser-Busch executives believe that despite the missteps they had made over time, a takeover would never happen. The company—once the world’s top brewer—had slipped into fourth place because of the insular, America-centric strategy it had espoused in recent decades, and it now appeared vulnerable. Its corporate planning committee, though, had repeatedly run the numbers and determined that Anheuser-Busch was simply too expensive to buy. The concept seemed too illogical to entertain. How could Budweiser, a beer synonymous with American culture, ever be brewed by a Belgian juggernaut whose executives spoke Portuguese at the office? It was unthinkable.
As days ticked by with no official bid from InBev, sentiment among Anheuser staffers at headquarters arose that this was, yet again, just another one of the rumors that artificially boosted the company’s stock price every few months. It was summer lightning, they thought—all flash but no rain. Still, something felt different this time. One newspaper report had included not just the price InBev was planning to offer but even the code names its Wall Street bankers were using for the project. A few members of the strategy committee—the 17 executives who mapped out Anheuser-Busch’s future—were plagued by an ominous feeling about the whole thing.
Robert “Bob” Lachky, a well-liked executive who was famous in America’s marketing circles for green-lighting Anheuser’s “Wassup?!” ad and the Budweiser frogs, reacted at first to the takeover rumors with a defiant charge of energy. No bid from InBev had actually materialized, he reasoned, and even if one did, surely a company that pulled the kind of weight Anheuser-Busch did could fend it off. However, a conversation with one of his mentors—a former company executive—over the Memorial Day holiday weekend had abruptly spun him in the opposite direction.
“It’s done. You’re done,” his former colleague had said.
“Come on, man, we can fight this,” Lachky shot back, startled by the man’s conviction.
“You’re done,” his mentor repeated determinedly, explaining that much of Anheuser’s stock was owned by struggling pensions and hedge funds that would gladly take InBev’s money. The markets were in the tank, and a bid from InBev would lock in badly needed gains for anyone who owned the stock. “This is a real offer. There’s such sentiment right now that’s going to be used against us,” he said. “The fact that we’re going to be forced to listen to it means that we’re in, we’re done.”
In a way, some staffers were relieved to hear that InBev’s long-rumored bid was on its way. “Maybe this is actually a good thing,” they thought. “It’s finally out in the open. We’re in play now.” Anheuser-Busch had been rumored as a takeover target for years, and battling the persistent speculation had been frustratingly distracting. Now, the company would know exactly which shark in the water was scouting an attack and how much it thought the company was worth. The takeover reports had already boosted the price of Anheuser’s stock, which had gone nowhere s
ince 2002, by more than 8 percent. If Anheuser could arm itself with the right data, it might even be able to convince investors it was worth more than InBev thought. The company was just starting to get back on its feet again after several rough years.
Positive thinking was only going to go so far, though, for a company that had done almost nothing to protect itself from the increasing threat of a takeover. Some sort of big change was starting to look inevitable. “The scenario you all hope for is that you can beat them off with a stick and be okay,” said Lachky. “But you knew darn well they were going to come back again. This is a matter of time. They’re either going to get us now or they’re going to get us later.”
Fear of the unknown had caused significant fissures within Anheuser-Busch since the reports of InBev’s interest first hit. Staffers had been huddling in each others’ offices at Anheuser’s headquarters, which were perched on a sloping hill just west of the Mississippi River, for muffled but fervent debates about whether they’d all still be standing there in a year’s time.
The company was refusing to comment on the rumors, in part because there was no actual bid on the table. How could it respond when InBev hadn’t actually stepped forward to confirm or deny its interest? Still, that wasn’t enough to appease the rank and file, who increasingly suspected that top executives knew more than they were letting on. The vacuum of information was causing a real credibility problem.
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