Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer (42 page)

Adolphus knew A-B had little defense against a serious takeover attempt. The Busch family owned less than 4 percent of the stock, not enough to swing a decision one way or another even in the unlikely event that they all agreed on which way to go. In the past few years, the company had dropped its so-called poison pill provision, which allowed stockholders to buy new stock at a discount in the face of a takeover threat, thereby making an acquisition more expensive for an unwanted suitor. In response to shareholder pressure, the board also had done away with “staggered” elections whereby only a third of its members stood for reelection each year. So now an unfriendly suitor could nominate a new slate of candidates and replace the entire sitting board at a single shareholders' meeting.

Adolphus thought $65 per share was a hell of an offer. He couldn't imagine the current directors turning it down. They'd risk spending the next five years in court defending themselves against shareholder lawsuits. So what was the Fourth doing with that “not on my watch” comment? Over the Memorial Day weekend, he put in several calls to August III and August IV to see what was going on. August III didn't respond, and when the Fourth finally got back to him, his description of the plan for fighting the takeover seemed disconnected from the urgent reality. He said he was confident his management team could build more shareholder value than InBev could offer by improving profitability and stock performance through a cost-cutting program code-named Blue Ocean that would eliminate more than half a billion dollars in spending over the next two years.

“That sounded like bullshit to me,” Adolphus said recently, “and it told me that they really didn't have a plan.” On Monday, May 26, he contacted David Kesmodel, the
Wall Street Journal
reporter who'd been covering the story, and told him that, contrary to what his nephew had said, some members of the Busch family were open to merger discussions with InBev. “There are members that absolutely want it to stay status quo,” he said, “and there are others that say they want to see some kind of chance to enhance shareholder value.”

The next morning it became obvious that the Fourth had committed another unforced error. He'd given a phone interview to the
Wall Street Journal
several weeks earlier in which he'd spoken a little too freely. The result was an article in which he seemed to make the InBev story all about him. “Anheuser CEO Fights for His Legacy,” the headline read. “As Rival Weighs a Bid, Busch Heir Still Seeks Father's Approval.” In what functioned as the company's first public response to the
Financial Times
revelations, the Fourth's every quote dealt with his father and their troubled relationship:

“I never, ever had a father-son relationship,” he said. “It's always been purely business.”

His transition to CEO had been “a very difficult, fluid situation,” he said, because he and his father had clashed over issues ranging from his choices for his executive team—“If I can't have my team then how can you hold me accountable?”—to his scuttled plan to buy the juice beverage manufacturer Hansen Natural Corp. for $7 billion—“He had a big problem with us venturing outside of the beverage beer company.”

“He could sell ice cubes to the Eskimos,” he said of his father. “He's brilliant and he has so much to offer, [so] long as when he offers it, it comes as advice instead of orders. It's kind of a fine line.”

Claiming that August III and Gussie went without speaking to one another for ten years before they finally mended their relationship, he expressed confidence that his father's “love and respect” eventually would come “when I'm ultimately successful.” Then he added poignantly, “I honestly do believe if I failed in my professional life, it would be much harder for me to ever gain his respect.”

However touching, his comments were not the sort of response the brewing industry, the citizens of St. Louis, or the financial community had expected from the CEO of the $19 billion company. They made him look emotional and weak. His father surely was livid. No one could say whether it was due to this one incident or an accumulation of things, because August III would never say, but relations between the two soon turned so cold they chilled any room they were in together. From then on, the Fourth was on a tight leash.

The board instructed him to send an e-mail to Jorge Lemann seeking clarification about the news reports. Lemann took several days to respond, claiming he had been traveling. They agreed to meet in Tampa on June 2. Some board members worried about sending the Fourth to Florida alone, so several coaching sessions were conducted to make sure he knew what to say and what not to.

The preparation was all for naught, however, as the meeting with Lemann and his longtime investing partner Marcel Telles lasted no more than 10 minutes, during which time the two men politely declined to confirm or deny that InBev was preparing a takeover offer. Back in St. Louis, the board concluded that there was nothing to be done but wait; either a bid would come or it wouldn't.

It came nine days later, on June 11, in the form of a letter from Carlos Brito to August IV, faxed to the Fourth's office at the soccer park and copied to the board.

As foretold by the
Financial Times
, InBev's offer was for $65 a share, a total of $46.35 billion in cash. Voicing “the highest respect for Anheuser-Busch, its employees and leadership, as well as the generations of investment that have created the Anheuser-Busch brands, particularly the iconic Budweiser brand,” Brito put forward a string of assurances:

As one writer put it, Brito “did everything but hand-deliver chocolate and flowers.”

It didn't matter. The minute A-B revealed the content of Brito's letter, howls of protest went up from politicians, pundits, and just plain folks. “I am strongly opposed to the sale of Anheuser-Busch, and today's offer to purchase the company is deeply troubling to me,” said Missouri governor Matthew Blunt. Vowing she would “do everything in my power” to prevent an InBev takeover, Missouri's Democratic senator Claire McCaskill sent a letter to the A-B board urging members to reject InBev's offer in consideration of “what this great and profitable company represents to St. Louis, the state of Missouri, and the rest of America.” Her Republican counterpart, Missouri Senator Christopher “Kit” Bond, couldn't help boasting that he had told Carlos Brito to his face, “This Bud's
not
for you.”

Even Democratic presidential candidate—and sometime Bud Light drinker—Barack Obama got pulled into the political posturing when his campaign plane was temporarily grounded at the St. Louis airport due to a mechanical problem. Responding to reporters' questions, the Illinois senator said it would be “a shame” if Anheuser-Busch was sold to a foreign company. “I think we should be able to find an American company that is interested in purchasing Anheuser-Busch, if in fact Anheuser-Busch feels that it is necessary to sell.”

“Could anything symbolize America's loss of economic supremacy more clearly than for its favorite beer to fall into foreign hands?” asked the London-based news magazine the
Economist
, adding snarkily, “Hitherto, Budweiser has been at the forefront of the Americanization of the world, often to the dismay of foreign drinkers of traditional beers who regard a Bud as a glass of water wasted.”

In the United States, a Web site called Savebudweiser.com urged Joe and Jane Sixpack to jump onto the jingoistic bandwagon, calling on Bud lovers to “band together as one voice and try to save more than just our beer. We don't want another American icon turned over to a foreign company.” Another Web site, SaveAB.com, was launched by Missouri governor Blunt's former chief of staff, Ed Martin, who promised to stage anti-InBev rallies inside Busch Stadium. “Selling out to the Belgians is not worth it,” Martin said, “because this is about more than beer: it's about our jobs and our nation.”

The strongest reaction to the news of InBev's offer came from the citizens of St. Louis, many of whom were surprised to learn that the Busch family didn't own, or at least control, Anheuser-Busch. The Busches had always acted as if they did. How else could the kid with all the legal problems have ended up in charge?

St. Louisans could be excused for not buying Carlos Brito's assurances that nothing bad would happen as a result of an InBev buyout. They'd heard that kind of talk before, most recently in 2001, when Swiss-based Nestlé acquired St. Louis's Ralston Purina, and in 2005, when Cincinnati-based Federated Department Stores bought the May Company, which operated the city's beloved Famous-Barr department stores. In both cases, the hometown headquarters soon disappeared, along with the jobs they had provided for decades.

“St. Louis has gotten to the point where we have the brewery and the Cardinals—that's it,” complained the owner of a restaurant across the street from the brewery. “This is a brewing town, and [A-B] is the last jewel in the crown,” said a city worker sitting in a small South Side bar called Crabby's. “If this deal goes through, I won't be buying their beer.”

A writer for the
Kansas City Star
succinctly summed up St. Louis's reaction: “It's about hometown pride, purpose, identity—in the face of a soulless global economy.”

Back in Adolphus Busch's time, St. Louis had been the fourth-largest city in America, behind New York, Chicago, and Philadelphia.
Time
magazine called it “the midwestern city with an Athenian heart, valuing music and philosophy, nurturing a great university [Washington U], birthing poets [T. S. Eliot, Maya Angelou] and hosting, in one zenith year, both the World's Fair and the Summer Olympics.” Unfortunately, as
Time
pointed out, that zenith was in 1904. Subsequently hit hard by Prohibition, the proud “Fourth City” and onetime brewing capital never fully recovered, though the population kept growing until the 1960s, when white flight to the surrounding suburbs began eroding the tax base. From then on, it seemed as if every time St. Louis made the national news, it was in a story about urban decay, inner-city violence, or racial unrest. As
Time
said, “No city in America has slid so far, nor with such dignity.”

Through it all, Anheuser-Busch had remained a constant, the city's classiest act, spreading its wealth across the community through charitable donations—a reported $10 million in 2007—and contributions to civic development projects and cultural events. “Anheuser-Busch is so much a part of life at all levels of society that you can hardly walk into a public building without finding ‘Anheuser-Busch Hall' or the ‘Anheuser-Busch Conference Room,'” said Dan Kopman, the cofounder of Saint Louis Brewery, maker of the locally popular Schlafly brand. Even St. Louisans who preferred Heineken or hated beer felt a flash of pride every time a voiceover at the end of a Bud or Bud Light commercial intoned, “Anheuser-Busch, St. Louis, Missouri.”

On June 26, fifteen days after receiving Carlos Brito's letter, the A-B board unanimously rejected InBev's proposal as “financially inadequate and not in the best interest of Anheuser-Busch stockholders.”

A-B's written response was friendly, respectful, and firm. “From your standpoint, we see that now could be an opportunistic time for you to make this acquisition, given the weak U.S. dollar and sluggish U.S. stock market,” it read. “From the standpoint of the Anheuser-Busch shareholder, however, a transaction with InBev at this time would mean forgoing the greater value obtainable from Anheuser-Busch's strategic growth plan.” The letter ended with what appeared to be a personal aside from the Fourth. “As you say yourself, you dream big. We respect your desires to grow your company, but your growth should not come at the expense of our stockholders.”

The rejection kicked off an increasingly tense back-and-forth, with both sides invoking the “interest of Anheuser-Busch shareholders” the way U.S. politicians carry on about “the will of the American people.” InBev quickly moved to oust the A-B board, putting forward its own slate of candidates, including Adolphus Busch IV, whose statement to the
Wall Street Journal
about being “open to discussions” with InBev was widely interpreted in the media as evidence of a Busch family feud. Adolphus had subsequently come out in favor of InBev's $46 billion offer, saying that Brito's assurances had satisfied his concern about preserving the legacy of the company. “A possible merger is not a family issue,” he said. “It is strictly a matter of shareholder value.”