Dethroning the King (30 page)

After firing off its initial press release, however, and making InBev think things were about to get ugly, the entire Anheuser side lapsed into silence. For the next two weeks, it was hard for Brito and his colleagues to get a sense of what Anheuser was thinking, even through back channels. They waited fruitlessly for a signal—any sort of overture that might indicate that their American rival was willing to talk. They weren't expecting a decision from Anheuser's board right away. Based on the wording of its response to InBev's offer, it seemed clear that the board wanted to show it wasn't in a rush. This was now the biggest all-cash takeover bid in history, however. In such high-profile merger situations, even the most confidential details tend to get spread around behind the scenes between banks, law firms, media outlets, and PR handlers as everyone jockeys to stay in on the action.

The vacuum of information from Anheuser-Busch's camp began to worry InBev. Anheuser-Busch was either taking a shockingly casual approach to the bid, which was certainly possible given the arrogance it had displayed in the past, or there was something else absorbing its attention behind the scenes.

Elements of both were at work. An undercurrent of delusion had always run up and down the chain of command at Anheuser-Busch, right until the day InBev's bid came in. Some staffers had grown frustrated over the company's myopia, but many still had a hard time believing that Anheuser-Busch—the American icon, maker of the King of Beers, and reigning conqueror of the U.S. beer market—could possibly be takeover bait. Even though the Busch family no longer technically controlled the company, the sheer force of The Third's personality alone had always been sufficient to ward off threats in the past. They had no reason to believe he was willing to sell this time around.

It wasn't the first time Anheuser-Busch had overestimated its relevance or power. “I think they were slow to take it seriously,” said one person close to Anheuser. “They were in denial. I'm just not sure The Fourth understood, and I'm not sure anybody really wanted to tell him from within his circle of advisors. They had just received presentations in front of the board saying ‘These guys couldn't afford us, we're too big.'”

Another, more deliberate move on Anheuser's part also slowed its reaction time, however. Its public relations team had cautioned the board against preparing any sort of defense strategy before InBev made an actual bid. Kekst felt it would reflect bias and make the board vulnerable to shareholder lawsuits. Some companies have no qualms about firing off a speedy rejection to an unwanted takeover attempt, but Anheuser took an especially—and perhaps overly—cautious route.

“You really can't create, and ought not to create, a defense strategy that's off the shelf,” said a person who favored Anheuser's line of thinking. “It says that companies are predetermined, if they get a bid, to knee-jerk to do that rather than to evaluate the bid. You're biased.” Because of the delayed start, Anheuser's board didn't consider a major media battle plan until June 25, a full two weeks after InBev's offer rolled in.

InBev and the rest of the world waited that entire time for Anheuser to draw its battle axe. Surely a legendary American company like Anheuser-Busch would have a wealth of options at its disposal. But Anheuser never bit.

“We were very surprised that they did not poison the waters in some way,” said one InBev advisor. “We expected more of an antagonistic response, and thought they would start marshaling their parties to say what a bad idea this was. That's when we really realized that they were going to be disorganized and slow-moving. We would ask around and say, “Are they talking to people? What are they saying?” And people would be like ‘Yeah, no, not really.'”

Several members of Anheuser's board made it clear that they were willing to fight if there was a chance of turning popular sentiment against a deal. In June, they asked for a report on the ammunition they had at their disposal. The board was running through a laundry list of tactics it might try to use to save the company: a “Pac-Man” defense in which Anheuser-Busch would spin around and make a bid to acquire InBev; a “scorched Earth” campaign where it would break itself into pieces and slam InBev in the press to sabotage its takeover effort; a deal with another brewer; and even a deal with a private equity firm. If they opted for one of these alternatives, the board wanted to know, how badly could they publicly malign InBev without hobbling themselves? And what were InBev's pressure points? Politics? Patriotism? Penny-pinching business practices? If they were going to dig into the trenches, they needed a big pile of mud to sling.

At the board's request, Kekst prepped a PR campaign for Anheuser to use if it decided to go ballistic on InBev. Larry Rand and his partner Thomas Davies passed out a set of pitch books at the board's June 25 meeting, and Rand launched into a quick rundown of how Anheuser-Busch could run advertisements and opinion pieces in U.S. newspapers to roil the masses and compel the Teamsters union, beer distributors, and state and national congresspeople to enter the fray. He showed a proposed ad that echoed the same altered slogan Kit Bond had slung at Brito in Washington: “This Bud's Not for You.” If the board really wanted to go to the mattresses, Rand said, they could inflict real damage upon InBev—and he was ready for battle.

The board was nonplussed. Kekst's “hard core” PR campaign wasn't nearly as combative or inventive as they had expected it to be. Was running a few pithy newspaper ads and boring op-eds really the best they could do? Anheuser-Busch was an American institution, and this had the potential to be one of the messiest takeover battles in corporate history. Surely there were more aggressive ways to incite public anger over the bid and rustle up support for Anheuser's independence.

“That seems kind of anemic,” one of the directors told Rand. “What if we really wanted to fight this thing? What do we do? It doesn't look like you guys have really even thought about it.”

“I see a bunch of these one-liner tactics,” said another, glancing down at the pitch book in front of him, “but what would you actually say? Where are the messages?”

Rand and Davies exchanged rueful glances as the rest of the room looked on expectantly, basically nodding in agreement that the pitch seemed tone-deaf and out of touch with the harsh realities of the situation they were facing.

“That's how it resonated with all of us in the room,” one Anheuser advisor said. “We thought, ‘This is literally one of the biggest takeover attempts ever, and this is what you show up with?' It was like he had hardly spent any time thinking about it. Everyone was totally underwhelmed by it, and it was just like ‘You've got to go back and do some more work.' ”

Kekst, however, had actually showed up with quite a bit more. Rand's team had ginned up a series of proposed advertisements and taglines that aimed straight at InBev's jugular—exactly the sorts of specifics the board was looking for. However, none of it ever saw the light of day. Randy Baker, who was spearheading Anheuser's public relations effort, had reviewed Kekst's materials prior to the board's meeting and pulled Rand aside.

“We don't want the board to see all of this stuff,” he told Rand, instructing him to pull the harsher sample ads and talking points out of his pitch book. By the time all of the offending pages were removed, Kekst's “scorched Earth” campaign was about one-fifth its original size, and even less formidable.

“No one really wanted to engage the board on anything very aggressive,” said one person on Anheuser's team. Baker seemed gun-shy about presenting certain information to Anheuser's directors, and because all of the communications efforts went through his office, the decision was ultimately his.

“Management was really controlling all of the information flow to the board,” said one person close to the company's PR effort. “He was really, really trying to keep a very close control on things. Basically, things would go into his office, and that was kind of it.”

If the company's ultimate aim was to fight, it had already dropped the ball on a huge opportunity due in part to its disjointed PR structure. Because InBev's financing wasn't knitted together at first, Anheuser could have fired back with vigor, using those initial few weeks to hamper InBev's attempts to recruit more banks. That didn't happen, though. Anheuser had stayed silent, giving InBev time to assemble the money it needed to make an all-cash bid.

Aside from buying the other half of Mexican brewer Modelo, furthermore, the company's defensive options were looking pretty unappealing. The board was already frustrated that August IV hadn't done more, financially and strategically, to shore the company up against a takeover.

“A year before, we had directed management to prepare defenses in case there was a run made at us,” said Ambassador Jones. “We didn't have any indication that anybody would do that, but you had to be prepared for it. And somehow, this came up and it seemed like preparations hadn't been made as we had thought.”

“Some members of the board thought that August IV hadn't led the way he was supposed to, but nobody knew for sure,” Jones said. “Once we got into a hostile takeover situation, we had to just concentrate on our business.”

There was no way they could simply reject InBev's offer without offering up an alternate plan. A Pac-Man defense wouldn't work because Anheuser had no interest in owning InBev. It would be nearly impossible for a private equity firm to compete with InBev, given the horrendous credit environment. And a scorched Earth campaign could really come back to haunt them. What if they weren't successful in driving InBev away, and they ended up sitting across the table from the same people they had been slamming in the media to negotiate a deal? Anheuser ran the risk of irreversibly poisoning its own well.

Some board members had favored an attack on InBev when they walked into that June 25 board meeting. It seemed they had no choice afterward but to lay low. Op-eds and snarky newspaper ads weren't going to cut it. At the end of that day's frustrating session, they opted against launching a scorched Earth attack and told Kekst to destroy its most aggressive materials. Instead, Anheuser's management decided to play up the company's Blue Ocean cost-cutting plan and publicly prod at the valuation of InBev's offer to suggest it was too low. It was a weak-kneed approach, and they knew it.

Anheuser's public relations campaign turned into even more of a tag-team effort from that point on. Several advisors, including Joe Flom and the company's bankers, tossed their hats into the ring with Randy Baker, Dave Peacock, Anheuser communications head Terri Vogt, and Kekst to serve as a de facto PR committee.

“Ultimately, the PR effort was something that all of us kind of then jumped in on,” said one person who was involved. “There was just the sense that we had an awful lot of people looking at this, and I think everybody felt that we had all done the drill before, working on raids, and we could handle this stuff.” Peacock, a marketing man by trade, played a particularly heavy role in the effort, in part to offset a lack of involvement by August IV. “The Fourth in many ways was very distant from a lot of this stuff,” said one company advisor. “It was really done by Peacock, by Randy, by all these other guys.”

It was an inopportune time for Anheuser-Busch to experiment with its outreach effort, however. The company's PR push was threatening to become even more disjointed at a time when sending a cohesive message was critical. Investors and the media were already wondering why Anheuser was taking so long to respond to InBev's bid.
Advertising Age
ran an article entitled “A-B Losing the PR War to InBev,” where it slammed Anheuser's “reactive, bunkered-down posture” and said it “appeared to be struggling to get its side of the story into the press.”

“This is not complicated stuff—it's PR 101—but they don't seem to be doing even that,” the article quoted one PR executive as saying.