Dethroning the King (2 page)

Carlos Fernández González: Chairman and CEO of Grupo Modelo; great-nephew of one of the company's founders

Antonino Fernández Rodríguez: Honorary Life Chairman, former CEO

Joele Frank: Managing Partner, Joele Frank, Wilkinson Brimmer Katcher

Robert Kindler: Vice Chairman of Investment Banking, Morgan Stanley

David Mercado: Partner, Cravath, Swaine & Moore

 

 

 

T
wo months after this book first hit the shelves, a 27-year-old aspiring beer model was found dead of a drug overdose in August Busch IV's bed. What had already been a rough two years for the former Anheuser-Busch CEO and notorious playboy became nearly unbearable, as hordes of reporters descended upon his mansion in St. Louis to investigate—alongside police—whether he was implicated in the woman's death. The takeover of Anheuser-Busch during his tenure had already been of keen interest to many Americans. Then suddenly, August IV himself became television news' hottest topic, and people were poking around in his brain in an attempt to understand why such a fortunate man continued to live a life so close to the edge.

The scandal rattled around the nation's news cycle for months as St. Louis authorities released toxicology results, prosecutors weighed whether to charge August IV in the woman's death, and members of her broken family fought over who had the right to sue him. August IV had already borne the emotional burden of the death of another young woman. He was now enmeshed in yet another highly public drama just two years after closing the sale of his family's former company—an event that had sent him spiraling into severe depression and loneliness.

The summer of 2008, which marked the start of the downfall of August IV's career at Anheuser-Busch, is one many people wish they could forget. In the immediate aftermath of the collapse of Bear Stearns in March, the global financial markets briefly looked as though they might stabilize. By the time legendary American brewer Anheuser-Busch received a takeover bid from foreign giant InBev in June, however, lenders Fannie Mae and Freddie Mac were teetering on the verge of insolvency and concern was mounting that U.S. taxpayers might end up holding the bag on $5 trillion in mortgage liabilities. The government stepped in to rescue both entities; but just a few months later Lehman Brothers and American International Group (AIG) failed, Merrill Lynch was taken over, and Goldman Sachs and Morgan Stanley came pounding on the U.S. Federal Reserve's door in need of a life-saving favor. That New Year's Eve marked the first time I can ever recall hearing a unanimous sigh of relief that the year was over.

I'm one of the lucky few who spent that nerve-wracking summer thinking about beer. I covered InBev's takeover of Anheuser-Busch as the
Financial Times
' U.S. mergers and acquisitions correspondent, and while the newspaper industry wasn't exactly rolling in cash, I knew as the saga unfolded that I'd have a desk waiting for me in the newsroom as long as the two brewing rivals kept duking it out. Anheuser-Busch capitulated shockingly quickly, however, and since most of the world was distracted by the implosion of the U.S. housing sector and the disintegrating global financial markets, the companies' battle in the press was short-lived. That's one of the reasons I felt it warranted further treatment here.

Authors often attest that the books they write are nothing like what they first envisioned—that in the course of reporting one story, the undercurrent of a different tale emerged that spun them off in a new direction. That wasn't the case for
Dethroning the King
. As the takeover fight unfolded that summer, it seemed as though each furtive conversation I had with a source hinted at a skeleton in someone's closet, and hardly any of it went reported at the time. With so much fodder at my fingertips—notes of what went on in the boardrooms of both companies, warped tales about the Busch family, and details of the drama that unfolded behind the scenes on Wall Street—I had a strong suspicion when I pitched this book about where the story was the juiciest. I just wasn't sure whether I'd be able to unearth enough details to make for a good read. The Busch family scions—and August Busch III in particular—don't wield the paranoia-inducing power they once did in St. Louis, now that their once-proud family company has been subsumed. But I still worried that I might be cast off like a pariah once I landed in Missouri to start my reporting.

Those fears proved to be woefully misplaced. People were eager to talk about their experiences. Anheuser-Busch played a huge part in the lives of countless Americans, from the company's employees, distributors, board members, and Wall Street advisors all the way down to the loyal drinkers of its Budweiser beer. Many of those people saw this book as their last chance to get something off their chests, a way to attain a level of catharsis and help lay the company to rest. Several said they'd been hoping someone would document Anheuser-Busch's collapse, and a few had considered trying to write books themselves before deciding they were still too exposed to the newly-merged company or to former chief executives August Busch III and August Busch IV. People close to both companies told me separately that they had already cast the movie with help from their colleagues. One former Anheuser executive had struggled to decide whether the role of August Busch IV, tortured son and heir to the company's throne, should be played by Jonathan Rhys Meyers or Robert Downey Jr.

Former employees of Anheuser-Busch met me for breakfast, in their offices and at their local coffee shops in St. Louis, and even graciously invited me into their homes. Each interview was fascinating and colorful, but the time I spent with Anheuser's legendary marketing guru Michael Roarty tugged hardest at my heartstrings. Roarty had suffered a stroke a couple of years earlier, and I spoke with him in his living room, perched at the edge of his couch so I could hear him whispering from a reclining chair a few feet away. He labored to get the words out, but it was clear his recollections and sense of humor were as sharp as ever. After we finished, Roarty's graceful wife, Lee, patiently guided me through the lower two floors of their home so I could pore over hundreds of priceless photographs on display showing the two of them standing with glitterati like Paul Newman, Frank Sinatra, Liza Minnelli, Lucille Ball, Joe DiMaggio, and former presidents George H.W. Bush and Ronald Reagan. It was an impressive display of the power big-spending Anheuser-Busch wielded in the United States. I drove away from the Roarty house grateful that I had decided to write this book, and remembering all the reasons I had decided to become a journalist in the first place.

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.

—August Busch III

 

 

 

S
ome 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.