Inbv Case Study

Anheuser-Busch, an American brewing company of St. Louis, MO, sold itself to a rival European brewery, InBev, on July 14, 2008 for $70 per share. The $52 billion dollar offer will be paid for by InBev with cash, making it the largest to date cash transaction ever recorded. The merger of the two firms would create the largest brewery globally and would combine the brands of Anheuser-Busch which include Budweiser and Michelob with the likes of Stella Artois, Brahma, Bass, and Beck’s provided by InBev. The firms are expected to experience a significant cost savings of $1.5 billion per year by 2011 and experience overall profit gains by 2010, based on a company announcement. The transaction, will allow the Anheuser-Busch brands to expand their brand globally and allow them to reach new markets, something that will help Anheuser-Busch specifically who has struggled with market penetration outside of the U.S. InBev on the other hand, will benefit from the established name brand of Anheuser-Busch as well as Anheuser-Busch’s core competency of advertising which should allow InBev to expand its reach even further. InBev is expected to maintain management of Anheuser Busch and keep all of its breweries in the U.S. open, while also giving Anheuser Busch two seats on the combined firm’s board. InBev is expected to finance the acquisition with $45 billion worth of debt and issue $9.8 billion worth of new shares. The markets reacted positively to the announcement with Anheuser shares rising .8%, while rising 8.6% on July 11th the Friday before the transaction announcement. Inbev, however, was down 3.4%.

InBev Overview

InBev, a European brewery based out of Leuven, Belgium, was founded in 2004 after the merger of Companhia de Bebidas das Ame...

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...h would be equally phased in over a three year period. These cost synergies would come from the two merged companies. Anheuser-Busch created a project called Blue Ocean in which they would cut costs from COGS & G&A, Overhead, and other branches such as their ten theme parks. From the InBev side, they would start to create synergies in China and other regions with overlap, thus creating the total $1.5 billion total synergy. The return on invested capital would be expected to exceed the weighted average cost of capital at the end of year two. The combined AB Inbev would see such increases as a combined revenue of 26.6 billion euros, an enterprise value of 71.6 billion euros, an EBITDA of 7.8 billion euros, and total increase in volume of beer to 460 million hectolitres. The market share of AB Inbev would increase in each of the major regions of the world to about 20%.