Many people like to relax on the weekends with an ice cold beer, but most of them do not realize how volatile the business of breweries can get. Every day all around the world there are companies that participate in mergers, acquisitions and hostile takeovers. However, in the case of InBev’s hostile takeover of Anheuser-Busch (AB), something else happened. It changed the culture and long-standing tradition of an all-American company which was steeped in history and valued tradition over profits. Under the management style of Carlos Brito the CEO at InBev, there will be a new way of doing business and that new vision is clear: “the best profit margins in the industry and the largest market ...view middle of the document...
In 1987, the two largest Belgian breweries- Artois and Piedboef- merged and Interbrew was created. Further expansion of Interbrew took place in 1995 when Labatt Brewing Company in Canada was acquired. In 1999 there was a joint venture with The Sun Group of Russia which allowed for market positioning in both Germany and China; and in 2004 the Brazilian beverage company AmBev joined with Interbrew to become InBev ("AB InBev: Our History", 2014, para. 3-5). This gave InBev a foothold in the global marketplace because it now held interests in Europe, Canada, Russia, China, and South America.
The Making of a Beverage Giant
In June 2008 InBev made an initial offer of $46.3 billion dollars to purchase AB which was immediately turned down. AB responded that it did not need help from InBev in order to increase its profit share. Very quickly the negotiations turned sour and AB engaged lawyers while InBev tried to remove members of AB’s board of directors. (De la Merced, 2008, para. 7) This was the classic sign of a hostile takeover since the bid for the acquisition of the company was made by going around management and the board of directors ("Hostile Takeover Definition", n.d.). However, August Busch IV, the current CEO at AB, felt pressure from stockholders to accept a deal. “Anheuser’s stock had remained mostly stagnant in recent years, but has climbed since InBev made its offer public last month” (De la Merced, 2008, para. 11). AB tried to escape the acquisition by offering to purchase the other half of its Mexican partner Grupo Modelo. The strategy was that if AB became too large then InBev would not be able to afford the purchase (Spain & Goldstein, 2008, p. 1). However, those negotiations fell through. So when the offer from InBev reached $52 billion it was approved on July 14, 2008 by the board of directors and the deal was closed by the end of the year.
Effects of the Agreement
When the takeover was complete, changes came swiftly and were felt throughout the AB family of businesses. The terms of the agreement stated that the Anheuser name would be part of the new company title and the North American headquarters would stay in St. Louis, but the company would be run by Brito and all but two of the board members were replaced by InBev members (De la Merced, 2008, para. 3-4). The timing and severity of changes was nothing new to In Bev; but to AB, which had been run as a family business from the beginning, the changes were difficult to accept. Brito came to AB with the intention of reducing spending and increasing profit margins and with that agenda in mind he laid off about 1400 people and sold AB assets such as Busch Garden and Sea World. He made additional changes by using lower quality packaging materials and substituted broken rice for the whole grain rice used in the brewing process of Budweiser products (Leonard, 2012, p. 3). Brito did not stop there. He stopped using long-time vendors of AB and cut the perks that the...