Dethroning the King (28 page)

The Fourth spent a good chunk of time in coaching sessions with Goldman and other advisors before leaving for Tampa, mapping out what might transpire and making sure he knew the right things to say.

When Lemann and Telles met him near the Tampa airport that Monday, the Brazilians weren't sure whether Anheuser's board actually even knew what The Fourth was up to. It wasn't clear the board had authorized the meeting, or even that it had approved the e-mail The Fourth had first sent to Lemann. Again, though, August IV was CEO of Anheuser-Busch. They had to assume he was speaking on behalf of the entire company. And according to board member Sandy Warner, he was. “August IV and the board were discussing every aspect of this,” he said. “He was very good at keeping us informed. There was no issue there at all.”

Lemann and Telles had a narrow tightrope to walk. InBev's financing still wasn't in place, so they didn't want to hint at a formal offer no matter how hard The Fourth pushed for one. They did want to convey, however, that there was truth to the takeover rumors. If August IV knew InBev was about to lay siege to his company, he might be willing to negotiate a friendly deal before things got messy.

When the trio sat down in Tampa, “August IV basically said, ‘You know, you haven't even given us an offer,' ” said a person close to InBev. “I think he was really trying to say, ‘Hey, we're not for sale; go away.' ”

It didn't work. After so much debate over whether to meet with InBev, and so much coaching and deliberation over how to approach the issue, August IV returned to St. Louis that evening with next to nothing. He had asked whether Lemann and Telles had a formal offer to make, and they replied that they didn't. Aside from that, their face-to-face had yielded frustratingly little clarity, and it had lasted all of 10 minutes. It was difficult for Anheuser's team to know whether Lemann and Telles had been cagey or whether The Fourth had simply misread them.

“My ideal result would have been for somebody else to have been sitting there with him who would be able to interpret what was said and what it meant,” said one person close to the company. The meeting ended up in some ways being a nonevent, other than it established that there's something there. Clearly, there's something there. That was kind of the conclusion. Tampa showed that they were clearly working on something.”

From getting nowhere with Lemann and Telles, August IV determined that InBev had a bid in the works but wasn't ready to act. Anheuser's team had already gauged that InBev would need to offer all or almost all cash if it really wanted to win, so they assumed Lemann and Telles had stayed mum because InBev hadn't been able to fill its coffers yet.

“Our conclusion at the time was ‘These guys would love to do something, they're clearly trying to do something, and if they're successful we may hear from them,” said one Anheuser advisor. “If not, we may not.”

They did. Just nine days later, InBev stunned the group that had gathered at Anheuser's soccer park with a $46.3 billion takeover offer. In the letter InBev faxed to The Fourth that day, Brito made sure to include that “Jorge Paulo Lemann and Marcel Telles greatly appreciated your taking the time to meet with them on the 2nd of June in Tampa.” It was like grinding salt in the wound.

—Christopher “Kit” Bond, U.S. Senator from Missouri

 

 

 

N
early a week had passed since InBev made its offer, but the Brazilians hadn't heard a word from Anheuser's board. Politicians in Missouri and in Washington, D.C., had found plenty of time to take sides, however, and an uproar was threatening to build.

The situation had all of the dynamics of a potential political and media maelstrom. InBev's attack prompted visceral reactions around the world, but the tumult was ringing loudest, not surprisingly, in America. It was the summer before one of the most critical presidential elections in American history, and Senators Hillary Clinton and Barack Obama were duking it out in the primaries to determine who would face their Republican colleague John McCain at the polls in November. In Missouri, where McCain ended up beating Obama by only a few thousand votes—49.4 percent to 49.3 percent—the governorship was also up for grabs. The country was abuzz as politicians jostled against each other to do anything they could to rally constituents in their favor.

Thanks to InBev's bid, Americans who had brazenly endorsed the spread of their own country's tentacles into other nations were suddenly being forced to consider whether foreigners should be able to buy high-profile U.S. assets. Some claimed that no self-respecting American would continue to drink Budweiser if the deal happened. Others supported the globalization that led InBev from Belgium to Anheuser's doorstep, and realized they had to accept the good with the bad. When Toyota made its first foray into the U.S. car market, they pointed out, the indignation was so fierce that it seemed as though the Japanese were bombing Pearl Harbor all over again. Just a few years later, Japanese cars covered America's highways, and few consumers seemed to be giving it a second thought—particularly because many of the cars were actually built in America by American workers.

One Florida couple that had no connection whatsoever to Anheuser-Busch, other than having been to Sea World to see Shamu, created a web site called
SaveBudweiser.com
to generate support for Anheuser-Busch. “We're big supporters of the military,” Wren Fowler, who started the site with her husband, told the
Wall Street Journal
. “Anheuser-Busch seems to be supportive, too. From there on, we only had Bud products in our house.” It wasn't really about the beer, she said, it was about the cost-cutting InBev would enforce and the charitable donations it might eliminate. “I like the beer,” she said. “But this is about something bigger.”

Christopher “Kit” Bond, a U.S. Senator from Missouri, asked the U.S. Department of Justice and the Federal Trade Commission to review the proposed takeover, claiming that it was his responsibility to make sure the Bush administration considered the potential deal's impact on consumers and the market. In a letter to the U.S. attorney general, Bond said sentiment in Missouri that was adamantly opposed to the deal “intends to be active” and was “growing by the moment.” Democrat Claire McCaskill, the other senator from Missouri, expressed a similar level of angst.

Industry watchers waited to see whether presidential candidates would be drawn into the fray, and the media did their best to bait them. John McCain, whose wife, Cindy, was heiress to Phoenix-based Hensley and Co., the country's third-largest Anheuser distributor, stayed quiet on the matter—probably a wise move, given the hornet's nest it would have stirred up over his conflicts of interest. Cindy McCain, who was known to drive around Phoenix in a car with license plates that read “MS BUD,” controlled somewhere between 40,000 and 80,000 shares of Anheuser stock, worth between $2.5 million and $5 million.

Barack Obama, who stayed mum on the topic for nearly a month, finally stated on July 7 that it would be “a shame” if Anheuser were bought by 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's necessary to sell,” he said. It was at this critical moment that Obama first hinted he supported the government intervention in American business that became a hallmark of his early administration. Within months of his early 2009 inauguration, the U.S. government took ownership of General Motors and Chrysler to stave off the deepening recession and prevent heavy job losses for American workers.

President Obama, incidentally, appeared to enjoy using beer as a diplomatic tool. He held what became known as the “beer summit” at the White House during the summer of 2009—an attempt to unite a black Harvard professor and the white police officer who arrested him after they controversially came to loggerheads. And when the United States played England in the World Cup the following June, Obama suggested to British Prime Minister David Cameron that they wager the best beer in America against the best lager in Britain over the outcome of the match. The game ended in a tie, leaving everyone to guess which brand of beer the president thought was the nation's best.

InBev had been able to stay ahead of the media curve so far, but it feared falling behind as opposition to the deal threatened to build. InBev's team knew they couldn't let pro-American political sentiment spin out of control. That had happened in a few other instances recently, and the results hadn't been good. Dubai Ports World dropped an effort in 2006 to buy a company that operated American shipping ports because of the firestorm it generated on Capitol Hill, and Chinese companies had scrapped the attempted acquisitions of both oil company Unocal in 2005 and Internet router maker 3Com in March 2008, just a few months earlier, in the face of political opposition over potential national security risks.

The idea that a sale of Anheuser-Busch might have national security implications seemed ludicrous. Was anyone really going to try arguing that a beer brewer was vital to America's interests? Did it matter whether Budweiser was concocted by an American or Belgian company, especially if the beer was still produced in America by American workers?

InBev's team clearly didn't think so, but it wasn't worth finding out. They needed to put a softer spin on the story to get politicians and the media off their backs before the pressure grew too heavy. So Brito traveled to Washington, D.C., to fly the company's flag.

He was reluctant, initially. “Brito was of the view: ‘Why should I waste my time? They're never going to like me, they're never going to support me,' ” said a person close to InBev. He changed his tune when InBev's advisors argued that it was time to give the company a relatable public face and show it wasn't some out-of-touch foreign villain. They weren't necessarily expecting a boycott, but they did happen to be dealing with a country in which conservatives started calling French fries “freedom fries” when France opposed the invasion of Iraq in 2003—even though French fries actually come from Belgium, InBev's home turf.

“You could be this nameless, faceless foreigner, or you could be smart, articulate, bright, polished Brito,” InBev's team told their CEO. “If you've got a guy like that who can talk on his feet and speaks good English,” one advisor said, “why not showcase him and say, ‘Hey, this isn't some weird guy from the barrio in Rio de Janeiro. This is a real guy, you know, Stanford Business School.' ”

So that Monday, Brito went Washington, D.C. The goal was to demystify the company, to neutralize potential opposition, and to calm the representatives of Congress who were spouting rhetoric over the injustice of letting an American institution be acquired by a foreign rival. It was relatively clear that the most outspoken politicians would still oppose the deal, but shaking their hands in front of the cameras certainly wasn't going to hurt InBev's cause.

It wasn't an easy two days. Anheuser-Busch had burgeoned into an influential force in American politics over its century and a half of existence, and Brito was trying to combat all of the money Anheuser had spent over the years to ensure it was represented in the halls of Congress.

Missouri's politicians had always seemed to be pressed securely under Anheuser-Busch's thumb because it employed so many workers in the state—which, not coincidentally, has some of the most permissive alcohol laws of any U.S. jurisdiction. Passengers in moving cars there are free to drink alcohol legally, and there is no law against consuming an open container of alcohol on the street.

Anheuser-Busch also had significant pull on a national level. Its political action committee (PAC), which parsed out donations to candidates, was one of Washington's largest, and it ran one of the capitol's most active lobbying offices with roughly a dozen lobbying firms on retainer, including former St. Louis congressman Dick Gephardt's Gephardt Group, former White House press secretary Michael McCurry's Public Strategies Washington, and powerhouse firms Akin Gump Strauss Hauer & Feld and Timmons & Co. At the height of its political giving during the 2002 election cycle, Anheuser-Busch and its employees spent $2.3 million on candidates, with 57 percent of the money going to Republicans. A team of eight Anheuser Clydesdales even marched down Pennsylvania Avenue during President Bill Clinton's 1993 inaugural parade despite protests from health and antialcohol groups.

Anheuser-Busch also had help from like-minded groups like the National Beer Wholesalers Association (NBWA), based just outside of Washington, which represents more than 2,850 beer distributors across the country and is consistently one of the nation's biggest-spending PACs. The NBWA ranked as the fifth-largest PAC contributor to political candidates during the 2009-2010 election cycle as of mid-2010 after doling out more than $1.8 million—57 percent of it to Democrats and the rest to Republicans—during that time period. That put it ahead of other heavily active PACs like the American Bankers Association and the Teamsters Union.