urbanSTL

My how things have changed.....

http://money.cnn.com/magazines/fortune/ ... /index.htm

In a 'sort of' related topic. Billionaire Jorge Paulo Lemann's 3G Capital to buy Burger King. He is, of course, a major investor in INBEV. Yet another US company gobbled up by foreign interests.

http://www.businessweek.com/magazine/co ... 489726.htm

**Warning…do not read this post if you plan on reading ‘Dethroning the King’.
I read the book and here are some of the more interesting points:

First off, I know that people think that moving the HQ would not make sense and many think it will not happen. I don’t know about moving the HQ, but moving some major operations at some point, is not out of the question.

“Couldn’t we just have it in New York or somewhere else?” ___Brito on moving the NA HQ prior to the takeover. He did not want to deal with entrenched workers and feels the STL operation is very expensive to run. After much debate within the group, they decided to keep HQ in St. Louis. Brito also pondered moving all people they wanted to keep, to NYC. That was also rejected, due to potential political and PR backlash.
They obviously have NO loyalty to STL. The minute something does not add up financially, I see no reason that INBEV wouldn’t slowly and unceremoniously start moving people to NYC or hiring new staff up there.

Another point made in the book. INBEV did not orchestrate some ingenious takeover. AB ‘s board let it happen. AB could have stopped it and remained independent, even though INBEV attacked at the right time and with the right offer. I think the book paints the Third and his cronies as the sellers and the Fourth and his backers as the ones attempting the save AB from takeover. If all board members would have been on board, the Modelo deal would have gone through fended off INBEV.

The 4th and his management orchestrated a deal with Groupo Modelo. It was a done deal. The deal would have AB buying GM for just over $15 Billion. AB negotiated that GM CEO Fernandez would ‘maybe’ eventually takeover AB-Modelo in a year or so. It was done, all but the signatures. Due to the long standing distrust between GM and AB, the negotiations were tough and long. The families that own Modelo finally approved the deal. Then, at the last minute, August III nixed the deal. He felt that AB was paying too much and giving GM and its controlling families too much control. He also felt that AB would fend off INBEV, but still have the same stagnant board, that has not been able to push major change through. This deal would have made AB too much to swallow for INBEV. It would have kept AB independent, sort of. GM would have had a ton of autonomy and a major stake in AB. They would have eventually had their guy, Carlos Fernandez at the helm. The Third did not like that deal. Also, being 70 years old, the book painted him as a seller from day one. He wanted out of the biz and didn’t mind the major payout he was going to receive. Other insiders say he was too proud to not put up a fight for the company he worked so hard to build up. Unfortunately, his inability to pull the trigger in the past on merger/acquisitions, sealed AB’s faint. He always felt the premium was too high for other companies. He also focused way too much on the US, while other firms grew internationally. He was his own worst enemy. He felt he was too big to be taken over. Unfortunately, that was not the case.

Other interesting points: The Fourth actually considered a deal with SABMiller, but talks never really got anywhere, as neither side wanted to appear as if they were getting taken over. It would have been a control issue for sure, not to mention the antitrust issues. AB also considered a merger with Diago, a wine and spirits company. They would have been huge. However, merging of beer and spirits companies has always been tough, considering there are not enough ways to combine and save money. There is not a lot of overlap with the 2 companies. AB would have been sold Guinness for a significant stake in the company, as part of the deal.

Also, back in 1999, Lemann and Telles of INBEV approached the Third with a merger offer. They said that the deal would create the ‘Coca-Cola of the beer industry’. The Third rejected the offer and sealed AB’s fate with the deal. INBEV continued to swallow other companies, while AB sat on the sidelines and dominated the US market.

The book also painted the Fourth as the heir that actually cared about saving AB’s independence for sentimental reasons. For the sake of saving his legacy and the legacy of his ancestors. They painted the Third as a control freak, dictator, my way or the highway, intelligent businessman, with the ability to influence anyone. He would crush you if you crossed him. The Fourth got a lot of blame publicly, for the Takeover, but it was inevitable. It would have happened regardless, due to AB’s missteps during the Third’s tenure.

It was not clear to me, how long the deal was signed for or if it will ever expire, but the Fourth and AB put certain terms in the deal. First, INBEV must preserve AB heritage. Keep the Clydesdales, namesake etc.. They must also donate so much to St. Louis charities and keep the NA HQ in St. Louis. I wonder if that deal ever expires.

Those are some of the things that stuck out in the book. The book did tend to go back and forth, like a Tarantino movie, but it was very detailed and made you feel like you were there. I did not like the extensive focus on the Third’s controlling management methods. I felt too much time was spent on it. the subject appeared regularly throughout the book. I thought JM could have done a chapter on him and moved on. We get the point, he was a dictator, control freak!!!



Highly recommend the book, good read, may not be new info to some, but still a great read.

VERY interesting interview with the Fourth...

http://www.stltoday.com/news/local/metr ... 86d46.html