Dethroning the King (47 page)

The two sides sat down in a conference room that morning at 8 A.M. and began diligently chipping away until an assistant ducked in to tell Weiss he had an urgent phone call—something that was important enough to pull him out of the discussion for a few minutes. The Modelo's team's minds started racing as they watched Weiss walk out.

“We're sitting there thinking, ‘You know what? We'll see what happens with A-B. We have the agreements ready to go,” said one person close to Modelo. “But we're not leaving this room either, because if it doesn't happen, we want to get our agreements done with InBev.” Weiss eventually returned, and by the time Modelo's team left that afternoon, they had negotiated for five hours.

It was already too late. As Fernández, Kindler, and Mercado swung out through the revolving door exits of marble-laden Rockefeller Center, where cell phone service is spotty, they connected with Goldman and received word that Anheuser's board had just asked InBev for a higher offer.

“We literally knew that it was over,” said one person close to Modelo. “There was zero chance our deal was happening once they told InBev, ‘Give us your last bid, because we're going to do something else.' ”

Kindler turned to Carlos Fernández, shook his head, and said, “Let's just all go home.”

The fact that Anheuser-Busch's board was stalling in order to talk to InBev didn't escape Don Antonino and the rest of Modelo's controlling family members. Don Antonino was nearing the end of his rope and threatening to pull his support altogether.

It put Carlos in a precarious spot—he was trying to bridge the gap between Modelo and Anheuser-Busch, but the space between the two companies was growing wider by the hour, and he could only stretch so far. If Anheuser-Busch didn't press “go” soon, it was going to lose Modelo altogether.

Sandy Warner, sensing Carlos's predicament, called his former colleague to confirm that the board was indeed reaching out to InBev. He offered a few words of support to Carlos, who sensed that Warner was still open to a deal.

“Hang in there, Carlos,” Warner said. “We'll be back.”

—Anheuser-Busch advisor

 

 

 

I
nBev's executives and advisors woke up on the morning of Tuesday, July 8, to find that the tectonic plates underlying their takeover attempt had shifted overnight.

Before leaving the office the evening before, they set the agenda for a strategy meeting that had been scheduled for the following morning at Lazard. That evening, August IV sent an e-mail to Jorge Paulo Lemann saying that Anheuser—for the first time since the takeover saga began—wanted to talk. It was the overture InBev had been hoping for, and it came less than a day after InBev publicly released its slate of nominees. Their attack must have hit the Anheuser board of directors right in the jugular, the InBev team deduced with a sufficient dose of pride, just before realizing that their agenda for the morning meeting was now moot.

InBev wasn't shocked that Anheuser was reaching out, but they were surprised it was happening so quickly. They had expected their American rival to stall for a few more weeks. InBev's top coterie of executives and advisors brought with them a palpable level of excitement when they assembled at Rockefeller Plaza that morning. “People thought, ‘This may finally be the breakthrough,'” said one InBev insider. “Because obviously, we knew we had come out with a blockbuster slate the day before. We were pretty proud of ourselves.”

Brito, as usual, was reluctant to read too much into Anheuser's outreach effort. He wanted to be sure it was an olive branch, not a riding crop. “People were optimistic and hopeful, but at that point, all we knew was they wanted to have a phone call,” said a person close to InBev. “We didn't know whether it was a phone call to tell us, ‘We're merging with Coca-Cola' or ‘We have a deal to go private.'” Anheuser-Busch could just be looking to cover its bases before heading off in a completely different direction.

After a brief discussion over how to react to the overture, the Brazilians responded to August IV with an e-mail of their own. The two companies quickly agreed to hold a telephone call just a few hours later, with three designated representatives on the line from each side. Squaring off against Anheuser-Busch's Whitacre, Warner, and August IV—all three, businessmen who had led emblematic American companies—would be a triumvirate of Brazilians: Lemann, Brito, and Telles. The call was bound to be the takeover fight's most critical moment so far, no matter what Anheuser planned to say. And InBev was eager to listen.

August IV, Whitacre, and Warner each dialed in that day from separate locations. August IV broke the ice with a few words as the call began, but Warner and Whitacre took over once The Fourth hit the most critical points in the script they had agreed to use. “The board picked us to do it because Ed had done a lot of it in one capacity at AT&T, I'd done a lot of it as a banker, and August had never done any of it,” Sandy Warner said. “We just brought different perspectives to it, and we brought those perspectives to the call.”

The two elder board members got to the point quickly. Anheuser-Busch was close to pursuing a different option, Warner said, and a critical board meeting was scheduled for late in the day on Wednesday. If InBev was still interested in owning Budweiser, the board wanted its best and final offer on the table by the time that meeting started. And they wanted more than just hard cash. They wanted assurances that any deal InBev proposed had a high likelihood of closing. If Anheuser's board didn't hear from InBev by then, he said, it would assume InBev was sticking with its bid of $65 a share. And at that price, Anheuser could easily justify opting for another transaction instead.

“Before we do any of that, and this disintegrates into a very negative contest, you may want to go back and consider whether $65 a share is your best and final offer,” Warner said. “If you get back to us within the time frame we've given you, we'll get back to you promptly with an answer.”

Reports of Anheuser's talks with Modelo were all over the newspapers, but Whitacre, Warner, and The Fourth refused to reveal any details about Anheuser's second option. “We decided that if they wanted to go to bed thinking that we were doing a merger of equals with SABMiller, God bless them, and if they wanted to go to bed thinking we were doing a recap (which would have loaded the company with debt), God bless them,” said one person close to Anheuser-Busch. “We weren't going to tell them point-blank what was going on.”

Anheuser's threat of a “Plan B” mildly unnerved InBev, but it wasn't particularly convincing. “While it was something they were thinking about, I got the sense that this was something maybe their advisors or management had come up with, but not something that these two guys really wanted to do,” said one InBev insider. “They basically told us, ‘You misread everything. We never said we wouldn't sell the company. You misunderstood our rejection on the 26th—this is really escalating and becoming hostile, and it doesn't need to be. We're going to do the right thing by the shareholders. We need your best and final.”

Before Tuesday's call had started, the Brazilians had agreed that if Anheuser-Busch made any sort of overture toward a deal, they would try to steer the matter toward their bankers rather than delving into specifics over the phone. “What they were going to do is say, ‘Well, why don't we have our bankers get together, and maybe you can show us that there is more value. We want to understand this exactly,' ” said one person close to the matter.

That's precisely what they did. And as word spread in InBev's camp that the two sides had talked, moods lifted significantly. “People started to think, ‘This thing is really going to happen,' ” one insider said.

InBev's newfound hope was matched by an equal, if not greater, sense of inevitability and dread on the part of Goldman's Ingrassia and Gross. The pair still had no clue what had really gone on behind the boardroom's closed door at the previous day's pivotal meeting in St. Louis. They knew that Modelo had been put on hold and that Anheuser planned to put in a call to InBev, but they had flown back that night with scant visibility on what might transpire next.

Gross picked up the phone when it rang on his desk on Tuesday and was greeted by Whitacre, Warner, and August IV, fresh off their call with InBev. The Fourth stepped in first to act as emcee, quickly greeting Gross and Ingrassia, who had also been looped in, before Warner and Whitacre delivered the blow.

The board wanted Goldman to drop what it was doing and schedule a meeting for later that day with Antonio Weiss and the rest of InBev's bankers, Warner and Whitacre said. “We want you guys to go negotiate with these folks. We've told these guys that we have other opportunities and that they need to increase their bid. Now, you need to go to talk to Lazard.”

“Holy cow,” Gross thought, his jaw dropping in astonishment. Hadn't they just spent three straight weeks racing to save the company by inking a deal with Modelo and finding $1 billion in costs to cut? The board clearly hadn't been too impressed by the effort. “This is over,” he thought. “This is
over
.”

He and Ingrassia dutifully picked up the phone to rouse Weiss, who had been waiting for the handset on his own desk to ring, and then summoned a car service to shuttle them up to Lazard's offices. It didn't take long for the two bankers to assemble the materials they would need to make their case for a higher price—they had already presented them to Anheuser's board several times. They exchanged a doleful glance as they settled in for the ride, motoring through a burgeoning sea of Manhattan commuters who were ending their workdays and starting for home.

The ride was surreal. It seemed way too early to be racing uptown to strike up a deal. What would happen next seemed obvious to the two seasoned deal makers. They would engage Lazard in some variation on the same elaborate mating dance that preceded most corporate mergers. Goldman would start off by stating that Anheuser deserved a bigger price. Lazard would counter that InBev didn't want to pay more. The two sides would lay out their respective cases and set the next day's board meeting as a deadline. And unless InBev fell completely out of character, it would then bump its offer high enough to satisfy Anheuser's board.

The past month had been filled with wrenching twists and turns, but the next few days were threatening to become sadly predictable. Anheuser's team had been just a hair's breadth away on Modelo only 24 hours earlier, and now the board had yanked the tablecloth out from beneath them. After decades of dominance as America's best-known brewer, Gross and Ingrassia thought, Anheuser-Busch's goose was cooked.

The two teams met at Rockefeller Plaza for a few hours and then adjourned, each returning to their home turf with the other's arguments on what Anheuser-Busch was worth. Ingrassia had talked Lazard through the same script Warner and Whitacre had used over the phone with InBev. The board was facing an actionable decision, he said. “If we make that decision, you will have lost your opportunity to do something. Based on that, we need to know your best and final price by Wednesday evening.” The ball was now in InBev's court.

Brito was concerned about paying too much, especially because he was bidding against himself. No other companies had the level of interest and financial wherewithal to buy Anheuser-Busch at the moment. He also feared that being too cheap might derail an acquisition that was just inches from his grasp. He wasn't InBev's ultimate arbiter—the board would rule at a meeting the following morning on whether to raise the offer. He would need to recommend a price and course of action, and that recommendation would carry the weight of his entire career behind it.