Dethroning the King (51 page)

“I think The Fourth was self-aware,” one Anheuser-Busch advisor said. “I think he carried himself as well as he could carry himself through all of this. He desperately wanted to do the right thing. It was clearly a crisis. It was his opportunity to step up and prove in a crisis that he could get things done. But long before any of this came up, I think he wished that he wasn't the CEO.”

With the company's official leader out of commission by choice, Anheuser's scepter fell into the hands of its vice president of marketing, David Peacock, a St. Louis native whose father had worked in marketing for the company for 15 years. Peacock had been hired during The Third's tenure but had become a trusted ally of The Fourth's, and he ultimately survived The Third's attempts to wipe key members of the management slate clean as his son took over.

“He's good, and The Third knew that. It was loyalty,” said one person close to the company. “ ‘Three' knew that Dave was loyal because he knew his father was extremely loyal to the company, so he trusted that. He protected [August IV], and he served as a buffer.”

To outsiders, Peacock—who was just a few years younger than The Fourth—was viewed as the man who knew Anheuser's operations best. While he had an MBA, he wasn't an expert in financial matters. He had morphed into something of a brewer's “Jack-of-all-trades,” exactly the kind of executive Anheuser had always tried to cultivate by shuffling up-and-comers between various divisions. Yet his most significant work—which was not surprising given Anheuser-Busch's proclivities toward the profession—had been on the marketing side of the company, where August IV had promoted him to vice president in late 2007.

Peacock had always handled a good deal of The Fourth's business, and had already been acting as Anheuser's senior ambassador for the past day or two in New York. When August IV left, that role quickly fell back into his lap.

“He was basically there and then took off,” said one of InBev's advisors in reference to The Fourth. “He didn't stick around. I think it was just too painful and he wanted the hell out of New York. So Dave was really the only representative walking around, which was a little weird. Usually at that stage there are troops from both sides. But it was really just Dave and a bunch of InBev people.”

In a way, August IV's scarcity during the meatiest part of the negotiations was a boon to Peacock, whose bright future as The Fourth's right-hand man had suddenly grown uncertain. This would give him plenty of exposure to the InBev team and give both sides a chance to see how well they could work together. Still, Peacock's job, for the time being, was to represent Anheuser-Busch and its shareholders as determinedly as he could and to battle InBev on important points when necessary. It was a fine line to walk.

He wasn't soft or overly deferential toward InBev, nor were Anheuser's M&A head, Bob Golden, or its top lawyer, Gary Rutledge, who, after laboring for weeks on Modelo, also played important roles in the negotiations with InBev that weekend. No one had any assurances that they'd have jobs with the new company, no real indications that their best efforts would amount to much of anything. They were too young to have accumulated the monstrous piles of stock options some of the older executives had, and they were in a position to continue working. If they played their cards right, there was a chance they could preserve roles for themselves.

“Dave Peacock had a very close relationship with The Fourth—would take a bullet for him,” said one Anheuser advisor. “But he was a pragmatist.”

The vacuum of leadership at Anheuser that week “caused Dave to take on an excess of responsibility,” said one of his fellow strategy committee members, who noted that he worked “until 5 A.M.” to manage the process. “He was the bridge to everybody,” said someone involved in the negotiations. “He was in everything—he was the one sort of handling their employee communications. There was someone on the ground doing it, but everything was funneled through him. I don't know how he got it all done.”

The amount of responsibility resting on Peacock's shoulders wasn't entirely out of proportion to the stakes the whole group was up against. They were trying to structure the biggest all-cash deal in history in a matter of days, and both sides wanted to emerge looking victorious while maintaining the perception that talks had been “friendly” in the end. For the most part, the tenor of the negotiations that weekend was amicable. “Everybody was there to get the bloody thing done,” one advisor said, “and everyone was working toward that.”

Yet after the public scrap the companies had had with each other, a few moments of friction were unavoidable. Anheuser's wounds were still raw after the stab in the back it had suffered at the hands of its former joint venture partner. The Anheuser-Busch team found it particularly tough to watch InBev's lawyers and bankers swagger into the conference room every so often with a request to alter the merger contract in a way that would reduce InBev's risk. Knowing how close they had come to striking a completely different deal that could have preserved their independence, it was all the Anheuser team could do to keep from losing it.

“The toughest thing, sitting down with InBev to negotiate that deal, was that I just thought, ‘For the love of God, we beat you! We had Modelo done, and you just have no idea,'” said one Anheuser advisor.

InBev's team certainly had a sense of the strange social and familial undercurrents that ran through Anheuser-Busch, but they didn't have a real understanding of how much those factors—and in particular, The Third's eagerness to sell—had played into their hands. If InBev could see the full picture, the Anheuser team stewed, perhaps they wouldn't be so quick to take credit for orchestrating the perfect takeover campaign.

“They had no idea how those forces would work to really deliver this company to them,” the Anheuser advisor said. “We had you beat! We just had a board that didn't want to beat you.”

“The bottom line is that if the board had wanted to beat them, they were beaten,” said another advisor. “If we had announced the alternative transaction, this deal would not have happened. Full stop, guaranteed. You didn't need fourteen winning strategies, there was one. And it was a big price, but it was a great deal.”

As the two sides began negotiating their actual merger agreement at noon on Saturday, most of the friction between them revolved around InBev's repeated attempts to lessen its risk. Many merger agreements include a clause that lets the buyer cancel the deal if, despite all of its best efforts, its bank financing falls through. Anheuser, however, wasn't willing to allow for that possibility. Skadden and Goldman made it clear from the start that there was no way Anheuser-Busch would walk away from its other options—namely, Modelo—unless it had complete legal assurance that the merger with InBev would close. They felt Anheuser had a powerful alternative to the InBev takeover, and its board hadn't even chosen to play hardball and push for more than $70 a share. Plus, the markets were growing more and more uncertain by the day. They had no intention of giving InBev a chance to walk away from the contract using one loophole or another. InBev had come pounding on Anheuser-Busch's door, not the other way around, and Anheuser's advisors didn't care whether every single bank InBev had recruited to finance the deal suddenly collapsed. If Anheuser-Busch was going to sign on the dotted line, the contract needed to be airtight.

“This was really us saying, ‘Okay, you guys want to take us over? There's no way in the world you're taking us over unless there's zero risk to us,' ” said an Anheuser advisor. “God knows what's going to happen here, and there's no way we're going to give these guys essentially an option on buying this thing.”

“It was, ‘How many times do we have to tell you no?' ”

The back-and-forth grew exhausting, and Anheuser's refusal to budge made for some tense moments. As Saturday wore into the wee hours of Sunday morning, the conference rooms at Sullivan & Cromwell took on a peculiarly ripe odor—the commingled scent of stale sweat, takeout Chinese food, and the occasional free InBev beer. Not everyone made it back to their homes or hotel rooms that night to shower and change, and some of the people involved in the talks later found that they had images burned into their memories of certain people wearing specific ensembles—a particular red blouse, or the same wrinkled khakis and polo shirt.

“I would say this as a joke but it's true,” said one banker who spent the weekend holed up onsite. “The lawyers did not change their clothes, but the bankers were certainly changing their clothes. I changed my clothes. The guys from Lazard—it would be against their culture not to change clothes and put on new cologne.”

During one particularly rough go-round with Anheuser's side, an associate from Sullivan & Cromwell lost her composure and left the room in tears after Tom Greenberg, a Skadden partner working for Anheuser-Busch, yelled at her over a relatively trivial detail. She hadn't slept in days and InBev's team rallied around her, threatening to tell Greenberg off, but cooler heads prevailed after a few minutes.

“There were, like, a lot of people in the room, and she just lost it,” said one person in attendance. “It was clearly just exhaustion.”

Tensions reached their most dramatic boiling point during a late-stage conversation between Antonio Weiss and Tim Ingrassia. One of the very last issues the two brewers needed to settle was how they should handle Modelo's threats to sue over the deal. The Mexicans were loudly claiming that the merger should only happen if they approved of it. Neither Anheuser-Busch nor InBev felt Modelo had half a leg to stand on, but that wasn't a clear certainty, especially since they were dealing with convoluted Mexican law.

InBev wanted to be sure that if it paid $52 billion to buy Anheuser-Busch, it was going to get the Modelo stake as part of the deal—Modelo was one of Anheuser's best-performing investments. To try to protect itself, InBev wanted a legal guarantee that it wouldn't lose Modelo or run into a situation where Modelo's controlling families could sell the stake to someone else. The scuffle over the issue stretched well into Sunday night.

Modelo's attempts to play both sides of the coin over the previous few weeks had been no secret to Anheuser-Busch. Modelo had deliberately told Goldman, in fact, that it was holding talks with InBev in an effort to maintain pressure on Anheuser. As the InBev and Anheuser teams argued over who should take responsibility for Modelo's threatened lawsuit, Ingrassia directed a pointed comment toward Weiss.

“Look, we know you've been talking to Modelo, so you should have an informed point of view about it. We can't take the risk,” Ingrassia said. “The only way we're doing a deal with you is if we have absolute certainty.”

Weiss bristled sharply when Ingrassia stated in front of the whole room that InBev had talked to Modelo—even though he and other InBev advisors had just met with Modelo earlier that week at Lazard's offices a few blocks away.

“That's wrong, we haven't met with them,” Weiss countered.

“You're a liar. We know you've met with them!” Ingrassia shot back. Weiss boiled over at being called a liar and for a minute, the derailment looked like it might threaten the bankers' ability to negotiate the deal in good faith.

“That was a modest setback for a moment,” said a person who was in the room. “I think Antonio didn' tappreciate it.”

“It was very clear that Tim and Antonio didn't like each other,” said another witness to the argument. “Everybody was under tremendous tension. It was one of those things, boys being boys.” Ingrassia left the room and walked up to Gross, who had stepped out as the conversation grew heated. He spent a moment ranting to cool off. After agreeing that the way Weiss characterized InBev's talks with Modelo was beside the point, Ingrassia apologized for calling Weiss a liar, and the two men set the uncomfortable exchange aside.