Anheuser-Busch and InBev have had plenty of chances to throw punches at each other over the past month. But restraint – which proved to be both sides’ best negotiating tactic – produced a friendly deal more quickly than either company might have expected.
A week ago, InBev’s unsolicited bid to take control of Anheuser threatened to get ugly. Anheuser had reached the final stages of a potential deal to buy the other half of its Mexican partner, Grupo Modelo, and had considered announcing the transaction after the July 4 holiday.
Anheuser’s board, however, was not convinced that the deal would be enough to disrupt InBev’s takeover attempt. And the price Modelo was asking Anheuser to pay – for a chess move that might not ultimately work – was “very, very full”, according to one person familiar with the situation.
InBev, meanwhile, was making preparations for a big move of its own. Frustrated by Anheuser’s unwillingness to negotiate, InBev had spent the past 10 days rounding up a slew of alternate nominees to Anheuser’s board of directors.
By Sunday, July 6, InBev had amassed a full slate of 13 nominees, many of them former top executives of well-known US companies. InBev then made a regulatory request on Monday for permission to go straight to Anheuser’s shareholders, asking them to vote for the board they preferred.
The tenor of the process shifted ominously that day. Anheuser’s attorneys quickly filed a lawsuit of their own in a Missouri court, in which they accused InBev of “deceptive conduct” and making misleading statements.
Yet rather than driving the potential for a friendly deal into the mud, Monday’s developments seemed to sharpen Anheuser’s focus.
With the potential Modelo deal as bargaining leverage, Douglas Warner III, an Anheuser independent board member and former chairman of JPMorgan Chase, called Doug Braunstein, JPMorgan’s head of Americas investment banking.
Mr Braunstein suggested that Mr Warner approach Carlos Brito, the InBev chief executive, according to a person close to the matter.
On Tuesday morning, Mr Brito received a phone call from Anheuser chief August Busch IV, in which Mr Busch requested that he and two of Anheuser’s directors set up a call with Mr Brito and his directors.
Later that day, Mr Busch, Mr Warner and Edward Whitacre, another of Anheuser’s independent directors, spoke with Mr Brito, Jorge Paulo Lemann and Marcel Herrmann Telles. Mr Lemann and Mr Telles, who know Mr Busch well, had also held a secret meeting with Mr Busch in Tampa, Florida, on June 2, before InBev’s offer became public.
Mr Warner and Mr Whitacre initially did most of the talking. They told InBev’s executives that while Anheuser’s board felt $65 a share was inadequate, they had deliberately refrained from enacting a poison pill anti-takeover provision or using scorched-earth tactics to thwart a bid.
Mr Warner and Mr Whitacre told Mr Brito that they were willing to listen, ahead of an Anheuser board call on Wednesday evening, to what InBev might have to offer. Anheuser’s lead merger advisers at Goldman Sachs then quickly convened on Tuesday for several hours with InBev’s lead adviser Lazard and its co-advisers at JPMorgan.
On Wednesday, ahead of the Anheuser board meeting, Mr Busch and Mr Warner again spoke with Mr Brito and InBev’s other representatives, this time also including chairman Peter Harf.
Mr Brito said that, subject to Anheuser’s agreement, a deal would be friendly, InBev was willing to pay $70 a share. Anheuser’s board agreed later that day to engage InBev at that price, and by Thursday evening, the parties and their advisers had staked out the preliminary bounds of a definitive agreement.
Mr Busch and Mr Brito met in New York on Friday to discuss the deal in person, and then brought in other senior executives for a pep talk about the merits of combining the businesses. With few outstanding issues left between the companies, the merger agreement was largely hammered out by Saturday night, sources said.
By Sunday, when both brewers’ boards voted to approve the deal, the only major sticking point remained Modelo, which believes it has a right under Mexican law to approve the deal.
Sources on various sides of that situation expect the parties to reach a settlement.