Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer (43 page)

His youngest brother Andrew promptly released a statement supporting August III and August IV. “I for one trust the current A-B board to put A-B shareholders first,” he said, “and have no reason to think that InBev's proposed board members will have the same devotion to shareholders' interests.”

The differences between the two stemmed more from their partnership—along with their brother Billy—in an A-B distributorship in Houston that strained relations among all three of them, but mostly between Adolphus and Andrew, who had rarely spoken in recent years. Other Busch family members were more ambivalent about the potential InBev buyout, and their opinions were evolving rapidly.

“When I first heard there was an offer from Carlos Brito, I was against it,” said Billy Busch recently. “The company had meant so much to me and my family, there was so much pride and history involved, that I didn't want to see it go. I thought August IV was just going to have to raise himself up and turn it around somehow. But then I started thinking about it, and as much as I hated to see it go, my business sense told me that maybe this was the time.”

It helped that Billy held a large amount of stock, in fact, more than any of his siblings. “I was the only one who never sold any,” he admitted. “I guess that's because I remembered that my dad never sold a share in his life.” Since each of the Grant's Farm children inherited 400,000 shares that had since split two-for-one twice, Billy now stood to make more than $100 million on a sale to InBev.

It was generally agreed that the A-B board had only one play to make if they wanted avoid the takeover, and that was to acquire the half of Mexico's Grupo Modelo that A-B didn't already own. Such a merger would add anywhere from $10 billion to $15 billion to the value of the company, possibly making it too expensive for InBev to swallow. InBev claimed to have secured $40 billion in financing, mostly from European banks. But the worldwide recession of 2008 was in full swing, and credit was becoming increasingly hard to come by.

The Modelo gambit was a long shot, however. Since 1993, A-B had invested more than $1.6 billion in the brewery, gradually acquiring a 52 percent noncontrolling interest. But the partnership had been an uneasy one, and August III was not exactly beloved by the five Mexican families that controlled their country's largest brewery. Because the Fourth had formed a relationship with Modelo's forty-one-year-old CEO, Carlos Fernandez, he and his strategy committee were assigned the task of trying to negotiate a merger agreement. The Fourth saw it as a last chance to redeem himself, and friends say he got caught up in the idea that he could save Anheuser-Busch for the city, the shareholders, and his family the way his grandfather Gussie had saved the Cardinals. If he pulled it off, he would be the hero of the story, and not held accountable forever for letting the dynasty go down on his watch. He might finally win his father's respect.

Over a period of several weeks, the Fourth and his team hammered out an agreement whereby A-B would pay $15 billion for the remaining 48.5 percent of Modelo and Carlos Fernandez would be named CEO of the merged company, which would be called Anheuser-Busch Modelo. But the A-B board balked at the idea. As much as they believed that Fernandez would be a much better CEO than August IV, they didn't want to pay a premium for Modelo and at the same time appear to turn over control to the Mexicans. They thought that would surely invite shareholder lawsuits. As August III said, “I don't want to spend the rest of my life in depositions.”

“I was with the Fourth at his house the night they told him they weren't going to do the Modelo deal and were probably going to sell to InBev,” said one of his confidants. “He was devastated.”

The InBev deal was sealed when Brito, concerned that A-B might go with Modelo if he didn't sweeten the pot, upped his bid to $70 a share, for a total of $52 billion. That would make it the largest cash transaction in the history of American business. It was an offer too big to turn down.

On November 8, four days after the election of Barack Obama, Anheuser-Busch shareholders voted to approve InBev's offer and the company surrendered its century and a half of independence, officially becoming Anheuser-Busch InBev, or ABI for short. Two days later, ABI announced the layoffs of 1,400 employees, 1,000 of them in St. Louis. Two weeks after that, the company told its suppliers that, in keeping with InBev's traditional practice, they would now have to wait 120 days to be paid, rather than the 30-day basis on which A-B historically had paid.

In the months that followed, ABI divested itself of more than $7 billion in assets, including Busch Entertainment, which operated its theme parks, Busch Gardens and SeaWorld. The division that had sprung from Gussie's passion for colorful, exotic birds was sold for $2.7 billion. The new Brazilian overlords cut back on sports sponsorships, such as the LPGA golf tournament in Williamsburg, Virginia, and reduced charitable contributions in the local community, notably the traditional donation to Gussie Busch's old American Legion post. A company retirees' group that for years had met at the brewery and enjoyed free beer was now asked to pay for both the room and the rounds. Fourteen of the company's top seventeen executives left, most of them as very rich men. The Fourth's payout amounted to more than $100 million, including $120,000 a month in consulting fees and a full-time two-man security detail for three years.

At the same time, the new management announced internally that henceforth salaries would be set at 20 percent below the market rate; that contributions to the pension plan for salaried employees would eventually be frozen; that office trashcans would be emptied only on Mondays, Wednesdays, and Fridays; and that personal plants would not be watered at all. There would be no more first-class travel; BlackBerry cell phone service would be severely curtailed. Management even began posting a sort of shaming list of employees who tipped the most, stayed in the most expensive hotels, or spent the most on cab fare.

The slew of cost-saving directives wreaked havoc on morale among longtime employees who had previously taken pride in working for St. Louis's flagship employer. “Now it's like working for a bunch of accountants, real hard-assed accountants,” said one. The biggest blow to employee pride may have come the day the work crews arrived on the ninth floor of the administration building, where the plush decor of the executive offices created a feeling of abundance and prosperity, signaling that all within were a special breed. August had built the building and had it decorated to his taste. Gussie had praised him for it, saying, “It's a fine building, son. You should be proud.” But to a cost-obsessed Carlos Brito, the private offices must have seemed anachronistic, extravagant, and dangerously inefficient. His work crews quickly gutted the entire ninth floor, turning it into an austerely functional open-configuration workspace with desks stretching from wall to wall; it looked more like an Internet startup firm working through its first round of venture capital funding than a company with a storied history dating back to the Civil War. If Gussie had lived to see it, he might have dropped dead on the spot. The
St. Louis Post-Dispatch
quoted a twenty-one-year company veteran as saying of the makeover, “The message from InBev is, ‘If you don't think we are serious [about cost-cutting], then just look at what we are willing to destroy.'”

There was still one final act of destruction to come, however.

In November 2009, August IV made his first appearance at the Pestalozzi Street plant in nearly a year. He was supposedly there to attend a board of directors' meeting, but he presented himself to a security guard at a different part of the huge complex and asked to be let into his grandfather Gussie's old office.

It was an odd request, but the guard recognized him and wasn't about to question it. Prior to the InBev takeover, Gussie's office on the third floor of the old executive office building had been preserved just as the old man had left it. The Fourth never had a close relationship with his grandfather, primarily because his father's more than ten-year estrangement from Gussie had limited his exposure to the family patriarch. The Fourth didn't see his grandfather more than a handful of times between 1975 and 1989, when Gussie died, and he didn't visit Grant's Farm once in that time. During his last few years at the company, however, he indicated to family members that he'd always been in awe of the old man, and on a number of occasions he sought and received permission from his uncle, Adolphus IV, the trustee for Grant's Farm, to use the big house to host dinners for A-B executives and distributors. His father had never done that.

When the security guard escorted him to Gussie's office, the Fourth was upset to find it unlocked and empty. The new owners had cleared the space of all Gussie's furnishings and mementos and shipped everything to Grant's Farm, where it now sat in boxes and crates in the ballroom on the third floor of the big house.

The Fourth ordered the guard to leave him there alone. The guard waited outside the door for fifteen minutes, then grew concerned and tried to reenter the office. But the Fourth had propped himself against the door and wouldn't let him in. “Get the hell out of here!” he shouted. “I'm fine; I'm on the phone.” When the guard finally gained entrance to the office, he found the former CEO lying on the floor in some sort of emotional state (one of the Fourth's confidants later described it as a “panic attack”). The Fourth pulled himself together and headed off in the direction of the boardroom, hollering over his shoulder to the guard, “You don't have to follow me; I know the way.” The guard, an ex-cop, said later that the Fourth appeared gaunt and hollow-eyed. “He looked like a heroin addict.”

The Fourth was in a dark place. He was no longer married to Kate. He filed for divorce in November 2008, shortly after A-B shareholders approved the InBev deal, stating in court documents that there was “no reasonable likelihood that the marriage can be preserved and therefore the marriage is irretrievably broken.” The court filings revealed that Kate had signed a prenuptial agreement, which had been supplanted by a property settlement. “We were having difficulties in our relationship and then [the takeover] happened and it was just horrible,” Kate said later. “He fought the buyout so hard, and he was so upset by it. He felt like he let everybody down.”

In addition to retaining his seat on the board of directors, the Fourth was being paid $120,000 a month in consulting fees supposedly for advising ABI management on new products, marketing programs, beer quality, and the company's relationship with charities. It's not clear if he did any of that, however. He'd only attended the one board meeting. He'd withdrawn from public view and was dividing his time between his Huntleigh mansion and his new $2.8 million waterfront home at the Lake of the Ozarks.

According to friends, he'd fallen into a depression and was being treated by a psychiatrist, who prescribed antidepressant medication. He was also self-medicating with large doses of binge buying. He bought a $1.25 million Bell helicopter and a $2.5 million, fifty-five-foot ocean-worthy cruiser, which he named after his pet mastiff
Waymo
(short for “way more better than you”). He acquired more than twenty high-end automobiles, including several Lamborghinis, Corvettes, Ferraris, and Porsches, a Rolls-Royce, and a $500,000, 600-horsepower Mercedes SLR McLaren with a lightweight carbon fiber body and a top speed of 230 miles per hour. He spent hundreds of thousands of dollars on guns, mostly high-powered, semi-automatic paramilitary weapons, not hunting rifles, including several .50-caliber machine guns with a range of more than a mile. He even built a small house on the Huntleigh property in which to store and display the arsenal. According to longtime
St. Louis Post-Dispatch
gossip columnist Jerry Berger, the gun house featured a full bathroom and a thirty-square-foot safe.

Whether he was at the Huntleigh house or the Lake of the Ozarks, the Fourth presided over constant get-togethers with his “guys,” and sometimes their wives and girlfriends. But the revelry and retail therapy apparently did little to fill the hole left by the loss of the company. At some point during the gatherings, the talk inevitably turned to the aborted Modelo deal and how he could have saved the company if only his father hadn't sold them all out for his own personal gain.

Said one regular, sarcastically, “He was feeling sorry for himself, with $100 million in the bank.”

When he ventured out in public, he often dressed in pajama bottoms, a T-shirt, dark glasses, a baseball cap, and orange Crocs. “It was sort of his Hugh Hefner outfit,” said a friend. “He thought it kept people from recognizing him.” He was spotted in the disguise as he shopped for a new Porsche one afternoon and while he was gambling at a West County casino early one morning.

By the fall of 2009, friends and family members were alarmed by his appearance and behavior. “Everyone in the family knew what was going on,” said one of the Fourth's friends. “When a member of the family is a disgrace, they want to ignore it, deny it, not talk about it. But Steve Bagwell got them together for an intervention.”

Bagwell was A-B's vice president of international marketing and a friend of the Fourth's dating back to their high school days. He was loyal to the boss but not part of the hard-partying “entourage,” colleagues say. With Bagwell's help, the Fourth's mother, Susie, and his sister, Susan Busch-Transou, attempted an intervention at the Lake of the Ozarks, enlisting Ron Burkle and another of the Fourth's super-rich friends, Florida-based hotelier Jeffrey Soffer, the boyfriend of Elle MacPherson. Both men flew to Missouri on their private jets to participate in the intervention. When the group confronted the Fourth at his home, he admitted that he'd become dependent on a combination of alcohol, cocaine, oxycodone, and antidepressants. He promised to go into rehab as soon as he returned to St. Louis and got his affairs in order. But he didn't.