Dethroning the King (46 page)

Whenever The Fourth was ejected from the boardroom, he would slink off into a little anteroom at the hangar that housed the fax machine and printer and start jabbing away on his BlackBerry, like a kid playing with his Game Boy outside his father's office. At one point during the independent directors' deliberations, The Fourth turned to the advisors seated next to him.

“What do you think they're talking about in there?” he said, only half-joking.

The Fourth had seemed increasingly dazed and out of sorts over the past few weeks, but his colleagues were nonetheless stunned to hear such a comment coming from the CEO of a major corporation. No one said much then, but several of them recounted the moment later in exasperation.

“What do you think is going on in there?” one of them said incredulously. “I don't know. You're the fucking CEO!”

August IV's spacey behavior unnerved some of Anheuser's executives and advisors, who knew there had never been a more critical time for their CEO to be on the ball. During one board meeting, he leaned over to one of his advisors to ask how the Busch family was going to sustain itself financially if the deal happened.

“If we sell the company, how are these guys ever going to get their dividends going forward?” he asked.

“It was like a trick question,” the advisor said. “I said, ‘August, if they sell the company they'll have cash. They can go decide whatever they want.' It was just bizarre. People were looking at him like, ‘Where the hell did that question come from?' ”

“I used to wonder if August was on drugs in the meeting,” the advisor said, voicing a question that was echoed by several other members of the team. “Because he would just sit there, like, completely out of it. At points, it seemed like he might be falling asleep.

“The Fourth was slowly falling apart,” said another. “He was in a physical and mental haze for weeks. Pedro's job was to get him dressed so he could show up for things he had to be at.”

Once Stokes and The Third had exited the boardroom, Joe Flom took the floor and made it clear to the independent directors that he was up for a fight if they wanted one. He didn't push them in one direction or another, but he said they had the legal flexibility to turn InBev down if they wanted to. “He talked about their fiduciary duty,” said one person in attendance. “They didn't have any duty to sell the company, there was this other terrific transaction out there, and yeah, it might get attacked, but there were good reasons that would uphold the action.”

“It was like the last stand—we'll get them on the beaches.”

The board felt that Anheuser-Busch's standalone plans could beat InBev's $65 a share offer, especially if Modelo was added in on top. They were uneasy, however, about hopping into bed with the Mexicans in the wake of The Third's performance that day. After letting the debate run on for a while, the oracle-like Whitacre finally interjected to offer his perspective.

“I just don't understand how we do this other transaction, with all of the risks entailed in it, without having some communication with the guys who put a very big bid on the table to see if they won't do better,” he told the board. “Then we can decide what to do.”

It was tough to argue with that logic, even for anyone who might have wanted to. If Modelo were offering itself at a bargain price for a limited time, things might have been different. However, Modelo's demands kept rising. How could the board explain its decision to shareholders without at least asking InBev for a higher bid? It would seem blindly irresponsible.

Some members of the board worried that they might lose Modelo altogether if they reached out to InBev. The Mexicans and their advisors were bound to be furious. Still, they decided, business was business, and their job was to get the best deal possible for Anheuser's shareholders. To lessen the affront to Modelo, they could keep InBev on a short leash by requiring them to come back quickly with a response.

With a unanimous show of hands, the directors agreed that Anheuser's best choice was to ask InBev to raise its bid. They needed to see the Brazilians' best and final offer in order to make the right decision, which meant there was no choice but to break the silence.

Just one question remained: Who should make the overture? Such a critical phone call, after weeks of stonewalling, would require a deft approach. Anheuser needed to carefully open a dialogue with its now-bitter rival and extract a higher bid using the threat of an alternative deal as leverage. If Anheuser overplayed or underplayed its hand, either by inflating the Modelo transaction's prospects or by revealing that the board was wary about it, InBev might not take the bait. “I won't accept a dime less than $70,” Ambassador Jones told the group, voicing a sentiment some other board members shared as well. But at $65 per share, InBev's current offer wasn't even that bad, given how poorly Anheuser's shares had been trading.

August IV was the obvious candidate for the job. The board had serious misgivings, however, about whether he should handle such a sensitive task. His trip to meet with InBev's executives in Florida had created more ambiguity than it had cleared up. It would be inappropriate to crack open the vault and call upon August III to help, and dipping a step beneath August IV in the ranks to recruit a second-tier executive would also look strange, especially since most of those executives favored the Modelo deal. So the board turned inward and ruled that Warner and Whitacre should team up with The Fourth to make the call.

“It was the three of them for adult supervision,” said one Anheuser advisor. “There was no way anyone would trust him.”

With the board now settled on a course of action, it came time to summon their CEO. A member of the group ducked outside the room, motioned to the secretary who was standing guard in the hallway, and asked her to find August IV to request that he return to the boardroom. When he strode in a few moments later, Warner debriefed him in front of the group.

The news must have been hard to swallow. The Fourth had labored for three weeks straight to secure the Modelo deal and save the company, and he was now being flatly overruled by his own board. He had never held much sway with the directors, but this was a punch in the gut—especially since his own father had helped steer the board's decision.

Still, August IV held himself high. “Once the evaluations were all done, I don't know that he had any big disagreement with it,” said Jim Forese. “He was actually quite professional about it,” said another person who was in the room. “And he was certainly, in those dealings from then on, quite professional. I don't think he was shocked.”

He was distracted enough, however, to neglect relaying the board's decision to the rest of his team. The company's bankers and executives had all been sitting in a separate area of the hangar, expecting that someone would come out to issue some type of pronouncement and perhaps bring them back into the boardroom to discuss matters further with the entire cast. Instead, they looked up and saw The Fourth's helicopter firing up its rotor blades. A moment later, one of the Anheuser-Busch jets started taxiing away from the hangar toward the airport's runway.

They exchanged puzzled looks, wondering whether the board's executive session had adjourned, what had been decided, and whether the departing plane was a New York-bound flight that was leaving some of them stranded in St. Louis. It was strange that no one had filled the bankers in, but even more disturbing that Anheuser's anxious executives had been left in the lurch. The board's unceremonious dissolution suggested that Modelo was definitely not a “go,” since the clueless people in the room were the ones who had been managing those talks.

“The fact that the whole management team wasn't brought back in is a little bit of how they treat people,” said one advisor.

Once most of the directors had disappeared, Sandy Warner finally summoned the group back into the boardroom, where he sat them down and announced that they had decided to contact InBev to request a higher offer by Wednesday.

“These are serious people, and they've offered a serious price,” he said, as board chairman Pat Stokes stood off to one side. “Let's see what the best we can get out of them is. We're going to go back to them and see if we can get more.”

By then, the news wasn't a complete surprise. Everyone had just witnessed The Third's vocal opposition to the Modelo deal an hour or two earlier. It left them shell-shocked to hear that the three sleepless weeks they had just spent on Modelo were being dragged out further so that the board could dip its toes in InBev's waters at the last minute.

Tom Santel, after spearheading the entire effort, was particularly taken aback. “I was shocked at that—that they were going to check with InBev first,” he said. “It just seemed, really, an odd thing to do, to check with an outside party before you did something.”

“We were trying to save the company,” he said. “We thought we had a very attractive means to keep our company independent, to grow it with an attractive deal and to really create an exciting future for ourselves and get the one deal we thought we'd never be able to get. There was a lot of disappointment.”

At Warner's request, the bankers in the room huddled before boarding their jet back to New York to write a script that would help guide the conversation he, Whitacre, and August IV would soon have with InBev.

Anheuser's team of dejected executives, meanwhile, trudged out to their cars and agreed to meet up at the Fox and Hound, a chain sports bar just outside the airport, to drown their sorrows. They were driving home, which kept them from commiserating too fully. After working like dogs to push the Modelo deal to the brink of an announcement—with press releases and conference calls ready to go—they realized they had no choice now but to mentally switch gears. It seemed appropriate to quaff a couple of overpriced Bud Lights after such a demoralizing day. The following morning, Tom Santel switched off all of his electronic gadgets—a deeply symbolic move for someone so tethered to the office—and hopped on his road bike for a long, contemplative ride out into the St. Louis suburbs.

That Monday marked a critical pivot point. Some Anheuser staffers and advisors had walked into the day's meeting expecting that the board would endorse a bid for Modelo by the time it adjourned. Instead, the board issued a sobering set of instructions and agreed to reconvene two days later to weigh the results. August IV would contact InBev to request its best and final offer. And he would have emotional and legal backing from the two men InBev had secretly targeted as its likeliest allies.

Modelo's entire team—from Carlos, María, and the other family members on down to their bankers, lawyers, and hired PR guns—waited in suspense that Monday, anticipating that at any moment they would receive a phone call that would change their lives. It never came.

Instead, Anheuser's board told Goldman to raise some modest clean-up issues with Modelo to help stall the process, under the guise that a deal was still happening. “It was ‘Go tighten up a few of these things that need to be tightened up with Modelo that the board wanted a little bit more clarity on,” said one person involved in the matter. “But in truth, it was mostly going to Modelo and saying, “Modelo, sit still for a week. The board will make a real decision next week.”

Fearing that their client would end up as the odd man out, Mercado and Kindler had already scheduled a meeting with InBev's advisors for the following day at Lazard's offices at 30 Rockefeller Plaza, the Manhattan skyscraper that houses the NBC studios and the famous Rainbow Room restaurant. They had a fully negotiated deal with Anheuser-Busch—the documents were ready to be signed. After getting stood up the day before, though, they wanted to nail down a treaty with InBev in case the Anheuser deal lost traction altogether. InBev, for its part, wanted to keep Modelo from striking that deal. Antonio Weiss and the rest of InBev's team didn't know that Anheuser and Modelo had come within inches of a merger, but they knew the talks were still on.