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AB InBev’s
Acquisition of
SAB Miller
MFIN Investment Banking Assignment
Group 5
1
Table of Contents
EXECUTIVE SUMMARY .......................................................................................
2
EXECUTIVE SUMMARY
Facing the increasingly competitive industry landscape in existing markets, it is crucial for AB InBev...
3
I. INDUSTRY OVERVIEW
As one of the oldest industries, the beer manufacturing industry is mature and dynamic at the same ...
4
On the other hand, the industry is expected to grow only 0.8% per annum globally in the next five years
through 2020. Su...
5
network through multiple channels such as direct distribution and partnerships across geographical segments
is key to AB...
6
II. COMPANY STRATEGIC RE-ASSESSMENT
Being the largest global brewer, AB InBev holds more than 36% of global beer market ...
7
growth. And it is the company’s opportunity to expand footprint in these markets to boost future growth.
Data Source: IB...
8
III. STRATEGIC ALTERNATIVE ANALYSIS
In order to achieve Ab InBev’s strategic goal of maintaining growth prospect in the ...
9
Alternative #3 Invest in Beijing Yanjing Brewery - Strengthen Presence andPower in China
AB InBev is now the third large...
10
product offering and improve capital efficiency by co-sharing excess capacity with the Coke. In FY2015,
SAB Miller’s op...
11
#3 Invest in Beijing Yanjing Brewery D C C B C
#4 Joint Venture with FEMSA D B D B D
#5 Merger with SAB Miller A A A D ...
12
IV. VALUATION
A deal will not be a good deal unless it is done at the right price. To best estimate the fair price for ...
13
with 2.2x total debt to EBITDA, which adds financial flexibility to the firm.
Growth Benchmarking
As shown in Figure B....
14
findings in the comparable analysis. Among all target firms, Modelo Beer and Fosters Beer who have had the
highest deal...
15
the cost of debt for each year in that period is calculated by dividing the current year's interest expense by the
prev...
16
As a result, the DCF analysis arrives at an enterprise value of US$86.5 Bn in the case of valuation
With Improvements (...
17
Furthermore, one of the most important and evident benefits of this potential M&A transition is to bring
together a lar...
18
V. HURDLES, RISKS & ACTION PLAN
Major Challenges and Potential Mitigation
Antitrust Scrutiny
As the world’s two largest...
19
Risk of Overpay
It's well-known that about 70% to 90% of all M&A deals don't meet their objectives. Given its operating...
20
This thorough dig-down enables us to answer key questions including “Is the beer industry attractive?”, “Are
the compet...
21
Newco
After receiving regulatory clearance, ownership consolidation of the two companies is expected to take
1 week. SA...
22
communicated throughout the organization in a timely manner to reduce uncertainties to employees. In the
months followi...
23
VI. CONCLUSIONS AND RECOMMENDATION
Considering the fact that the beer manufacturing industry is characterized by intens...
24
APPENDIX
Appendix A: Porter’s Five Analysis on Global Beer Manufacturing Industry
Factor & Rating Explanation
Threat of...
25
Appendix B: Comparable Analysis
Table 1: Comparable Companies
Comparable Companies
(USD in Bns, except per share data)
...
26
Table 2: Beer Production Volume
Company Volume
SABMiller plc 324 Annual report page 39
Anheuser-Busch InBev SA/NV 457 A...
27
Figure 4: World’s Fastest Growing Beer Markets
Table 3: Revenue by Region
Geographic Region SAB Miller AB InBev Diageo ...
28
Table 4: Profitability Benchmarking
Company
Total Revenue
Growth 2015
EBITDA
Growth 2015
EBITDA
Margin 2015
EBIT Margin...
29
Table 5: Relative Valuation
Multiple Enterprise Equity Diluted Price
(USD in billions, except per share data) Value Val...
30
Appendix C: Precedent Transaction Analysis
Table 1: Precedent Transactions
Acquirer Target Date Target EV/EBITDA Target...
31
Source: Bloomberg
Table 3: Precedent Transaction Valuation
SABMiller Relative Valuation
(USD in Bns, except per share d...
32
Appendix D: DCF Analysis
Table 1: Cost of Equity
Table 2: Cost of Debt
Table 3: Cost of Capital
Beta 0.85
Risk-Free Rat...
33
Table 4: As-Is Valuation Assumption (1)
Table 5: As-Is Valuation Assumption (2)
Table 6: DCF Analysis of As-Is Valuatio...
34
Table 7: Terminal Growth Value of As-Is Valuation
Table 8: Sensitivity Analysis of As-Is Valuation
Table 9: DCF Analysi...
35
Table 10: Sensitivity Analysis of Valuation with Improvements
Table 11: Capital Expenditure Schedule for DCFAnalysis of...
36
Table 14: Pro Forma Income Statement for DCF Analysis of Valuation with Improvements
With Improvements (000's units) FY...
37
Table 15 Summary of Valuation
Valuation Approach Scenario EV
Share
Price
Comparable Companies Analysis
Base Case US$97....
38
REFERENCE
[1] Marija Mamolo, Sergei Scherbov “Population Projection for Forty-Four European Countiries: The Ongoing
Pop...
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  1. 1. AB InBev’s Acquisition of SAB Miller MFIN Investment Banking Assignment Group 5
  2. 2. 1 Table of Contents EXECUTIVE SUMMARY .....................................................................................................................................2 I. INDUSTRY OVERVIEW...............................................................................................................................3 Global Beer Manufacturing Industry Diagnosis..........................................................................................3 Long-term Success Factors...........................................................................................................................4 II. COMPANY STRATEGIC RE-ASSESSMENT..................................................................................................6 AB InBev SWOT Analysis..............................................................................................................................6 The Future Direction.....................................................................................................................................7 III. STRATEGIC ALTERNATIVE ANALYSIS.........................................................................................................8 Alternative #1 Continue Organic Growth....................................................................................................8 Alternative #2 Acquire Diageo’s Brewing Business - Explore African Market & A Famous Brand............8 Alternative #3 Invest in Beijing Yanjing Brewery - Strengthen Presence and Power in China..................9 Alternative #4 Joint Venture with FEMSA – Further Expand Latin America Exposure..............................9 Alternative #5 A Merger with SABMiller – Creating the True Global Number One Beer Brand ...............9 Strategic Alternative Conclusion................................................................................................................10 IV. VALUATION .............................................................................................................................................12 Relative Valuation Approach – Trading Comparable Analysis..................................................................12 Relative Valuation Approach – Precedent Transaction Analysis ..............................................................13 Intrinsic Valuation Approach – Discounted Cash Flow (DCF) Analysis.....................................................14 Triangulate SAB Miller’s Fair Value............................................................................................................17 V. HURDLES, RISKS & ACTION PLAN...........................................................................................................18 Major Challenges and Potential Mitigation...............................................................................................18 Risks and Concerns.....................................................................................................................................18 Action Plan..................................................................................................................................................19 VI. CONCLUSIONS AND RECOMMENDATION...........................................................................................23 APPENDIX........................................................................................................................................................24 Appendix A: Porter’s Five Analysis on Global Beer Manufacturing Industry...........................................24 Appendix B: Comparable Analysis.............................................................................................................25 Appendix C: Precedent Transaction Analysis ............................................................................................30 Appendix D: DCF Analysis ..........................................................................................................................32 REFERENCE......................................................................................................................................................38
  3. 3. 2 EXECUTIVE SUMMARY Facing the increasingly competitive industry landscape in existing markets, it is crucial for AB InBev to determine a strategy that helps maintain the competitive position and create value for shareholders. After the analysis of the global beer industry landscape and our company’s specific characteristics, five strategic alternatives were crafted and one was selected: to merge with the company’s archrival - SAB Miller. We believe not only significant synergies can be realized, more importantly, an undisputable global No.1 beer company with unparalleled brand portfolio and efficiency will come to life. Valuation  Discounted Cash Flow Analysis: using a WACC of 7.34% and including synergies, an enterprise value of US$108.4 Bn was arrived. Sensitivity analysis reveals that firm value largely falls in the range from US$99.1 Bn to US$122.8 Bn.  Comparable Company Analysis: a valuation range between US$93.3 Bn to US$106.0 Bn was arrived with a control premium of 25% and a range of 16.1x to 18.3x of EV/EBITDA.  Precedent Transactions Analysis: SABMiller was valued using a transaction multiple range from 18.0x to 21.0x of EV/EBITDA, resulting in a valuation in between US$102.4 Bn to US$119.5 Bn. Recommendation Our Opening Offer is US$90.0 Bn of enterprise value, which is slightly higher than its current enterprise value. The Target Price is US$99.6 Bn, a valuation implying that 60% of synergy was allocated to SAB Miller. The Walking-away Price is US$108.4 Bn. The recommended action plan is divided into two parts. Our short-term action plan includes approaching the SABMiller board of directors, conducting due diligence with emphasis on legal matters and mitigation of associated risks, as well as negotiating a lower deal price. Our long-term action plan comes into effect upon receiving regulatory clearance. Steps to be taken are: consolidating ownership of AB InBev and SABMiller, structuring the deal with 5% cash 35% debt and 60% equity, post-merger integration ensuring comprehensive cultural integration, as well as specific business actions to cultivate a stronger presence in the African market, including product R&D, utilization of distribution channels, and large-scale marketing campaigns.
  4. 4. 3 I. INDUSTRY OVERVIEW As one of the oldest industries, the beer manufacturing industry is mature and dynamic at the same time. In 2015, the industry is expected to generate US$135.3 Bn revenue, representing a 1.3% decline y-o-y. On the global level and looking forward, the industry environment is expected to become increasingly challenging. Therefore, it is paramount for AB InBev to keep a holistic and updated view of the industry in order to determine the factors the company needs to possess in order to be successful in the long term. Global Beer Manufacturing IndustryDiagnosis Over all, the competitive landscape of the industry continues to be challenging on multiple fronts (Appendix 1). And to highlight the most important forces in play: Intensive Rivalry Competition between players is expected to continue to be intensive, primarily driven by the high industry concentration and low overall industry level growth. Given the mature nature of the industry, consolidation has been the mean of growth for leading players for years. Despite the already very high market share concentration, such trend is expected to continue for reasons such as to grow market shares, to build diversified product portfolios, and most importantly, to reduce costs. 3.5 2.5 2.5 4 4 Threat of New Entrants Buyers’ Power Suppliers’ PowerThreat of Substitutes Rivalry Porter's 5 Analysis Visualization Note: the higher the rating, the more infavorable of the industry 85% 79% 65% 81% 62% 62% 73% 0% 25% 50% 75% 100% Market Share of the Top 4 Players in Each Continent Data Source: Euromonitor $50 $70 $90 $110 $130 $150 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E INDUSTRYREVENUE($BN) +0.8% Data Source: IBISWorld Global Beer Manufacturing Industry - Revenue
  5. 5. 4 On the other hand, the industry is expected to grow only 0.8% per annum globally in the next five years through 2020. Such low growth is driven by a number of factors, such as the stagnated population growth for targeted group in developed markets [1&2] (adult between 18 – 44 years old), and consumers (especially Millennials)’ increasing awareness and attention to personal health[3]. On the bright side, competition so far is mostly focused on product differentiation and marketing rather than pricing. Increasing Threat of New Entrants The threat of new entrants is on the rise for the industry as a result of the shift in consumers’ taste and technological improvements. In recent years, consumers have started to grow tired of premium beers and gradually shifted their preference to more niche products such as craft beers. At the same time, technological improvements in the industry have kept at a steady pace. Such improvements increasingly allow micro brewers to compete profitably on a much smaller scale. Continued Threat of Substitutes In addition to the traditional substitutes of beers such as soft drinks, spirits, and wines, there is an increasing number of new alcoholic and non- alcoholic drinks being developed in recent years. Industry Growth Opportunities However, it is noteworthy that emerging markets continue to present attractive opportunities. Africa, Asia, and South America are all expected to continue to pose strong growth in the next five years supported by 1) adoption of beer-drinking life style; 2) growth in targeted population group; 3) increase in disposable income level. Long-termSuccess Factors Given the industry environment, to compete successfully in the long-term, a leading international brewer, such as AB InBev, needs to maintain its market share and profitability in the traditionally developed markets, and cultivate its presence and influence in the emerging markets. To achieve this overall goal, AB InBev must possess four fundamental qualities. Strong Distribution Network Since beer products, in general, have a very low value to weight characteristic, therefore, minimizing distribution costs is critical to international beer manufacturers. A strong distribution Long- term Success Distributi on Network Financial Flexibility Economie s of Scale Brands and Product Portfolios
  6. 6. 5 network through multiple channels such as direct distribution and partnerships across geographical segments is key to AB InBev’s future. Brands and Diverse Product Portfolio Beer is a volume business, and in order to convince customers to make repeated purchase, maintaining a relevant brand image is critical. In addition, facing the more and more rapid change in consumer taste in different products, it is also important for Ab InBev to develop and invest in high quality products to satisfy different consumer preferences and minimize the impact of unexpected shifts in consumer tastes. Economies of Scale With increasingly advanced brewing technologies, firms of a wide range of size are able to lower per unit costs to compete in the industry, thus, it is essential for AB Inbev to stay as efficient as possible. Financial Flexibility Keeping financial flexibility is vital for AB InBev’s long-term success. On one hand, with consolidation continuing to be the trend, it is essential to have a heavy war chest so that necessary steps could be taken at the right time. On the other hand, given the fierce competition, staying financially flexible also serves as a defense mechanism to protect the company from unexpected changes in the industry.
  7. 7. 6 II. COMPANY STRATEGIC RE-ASSESSMENT Being the largest global brewer, AB InBev holds more than 36% of global beer market sales, and expected to generate US$ 48 Bn revenue in 2015. Despite overall flat industry growth in the past five years, the company has achieved a remarkable 5% CAGR in topline over the last five years while maintained a healthy D/E ratio of about 22%. The current leading position of AB InBev was a result of decades’ development in multiple dimensions of the business. There is no doubt that further value creation will be increasingly difficult, both sales growth and margin improvement will be harder to achieve. Thus, it is crucial to reassess the company’s strength and weakness in conjunction with the industry competitive landscape in formulating future strategic directions. AB InBevSWOT Analysis Strength – Strong Customer Loyalty In recent years, the company’s impressive revenue growth was driven by the products upward pricing and volume growth at the same time. This achievement demonstrated the strong loyalty from its customer relative to industry peers. Strength – Global Recognized Brands & Products Brand names and product portfolio are critical to the industry players. As the industry leader, the company owns many world class names that provide a great competitive advantage in marketing in new geographical areas and new products. Strength – Excellent Financial Flexibility In recent years, AB InBev has implemented stringent cost control, not only resulted in best cost efficiency among peers, but also built significant amount of financial dry powder for strategic actions. Weakness – Stagnating Growth in Many Major Markets In a number of markets, such as North American, that the company has a leading stance, the overall growth is stagnating. This implies a soft growth prospects in the future if the company stays status quo. Opportunity – Rapidly Growing African and Asian Markets As discussed, the two geographic areas demonstrated and are expected to continue demonstrating strong Strength: -Global Brands and portfolio -Strong brand loyalty -Financial strenght Weakness: - Lack ofgrowth potential in N.A. Opportunity: - Emerging growth market Threat: -Consumer taste shift
  8. 8. 7 growth. And it is the company’s opportunity to expand footprint in these markets to boost future growth. Data Source: IBISWorld,EuroMonitor Threat – Consumer’s Rapid Change in Taste Similar to other players, the company faces threats from the unpredictable but expected change in consumer taste. Competitors both inside and outside the industry can capitalize on such shifts and attract customers. The Future Direction Given above SWOTanalysis and in conjunctions with the industry competitive dynamic, it becomes clear that staying status quo is imprudent. To continue creating value for shareholders, the company need to shift its growth focus to rapid growing geographies such as Africa, and continue to seek means to improve return on capitals. 17% 15% 33% 5% 29% 1% North America 14% Latin America 16% Europe 27% MiddleEast & Africa Asia Pacific Australasia 1% 7% 35% 10 Yr Global CAGCR 2.2% 10 Yr N. America CAGR 0.0% 10 Yr Asia CAGR 4.3% 10 Yr Africa CAGR 5.8% Industry Market Share by Geographic Locaion and Key Growth Rates
  9. 9. 8 III. STRATEGIC ALTERNATIVE ANALYSIS In order to achieve Ab InBev’s strategic goal of maintaining growth prospect in the competitive and mature industry and continue to improve financial returns, five strategic alternatives are identified as shown in the figure below. In addition, the four industry success factor along with difficulty in execution are used in subjectively evaluating each of these alternatives. Strategic Alternatives Alternative #1 Continue Organic Growth Theoretically, all long-term strategic goals can be achieved organically. Organic expansion can be carried out in the targeted emerging growth markets, while maintaining a more flexible financial stance that enables the company to continue paying a high dividend to shareholders. However, this approach suffers a few disadvantages that do not match our strategic objectives. For instance, in addition to the time consuming managerial attention needed, more importantly, it is extremely difficult to build strong beer brands and powerful distribution channels given the intensely competitive industry landscape, not to mention realizing economies of scale in less exposed markets. Alternative #2 Acquire Diageo’s Brewing Business - Explore African Market& A Famous Brand Diageo’s brewing business presents itself as an attractive acquisition candidate for two major reasons. First, as Africa is one of the target markets for AB InBev to explore future growth, Diageo has a 12% market share in Africa, primarily from East Africa. Secondly, acquiring Diageo will give AB InBev the influential Guinness brand, which equivalent to US$1 Bn annual revenues addition. Therefore, acquisition of Diageo’s brewing business presents strategic alliance with AB InBev’s long term goal in at least two aspects: entering the rapid-growing African market and adding a well-known brand to its brand portfolio. However, difficulty may arise from Diageo’s unwillingness to sell without an extremely high premium or without acquiring the entire company, because the beer segment has generated meaningful cash flow for Diageo and having a diversified product portfolio is also one of Diageo’s stated objectives.
  10. 10. 9 Alternative #3 Invest in Beijing Yanjing Brewery - Strengthen Presence andPower in China AB InBev is now the third largest player in China with 18.6% beer volume [4]. Besides organic growth, forming a strategic partnership by investing in a leading local player can help AB InBev gain insightful local knowledge and promote distribution in the large, fast growing, but a relatively fragmented market. And a rare opportunity presented itself: Beijing Yanjing Brewery, China's third-largest beer maker, plans to sell about a 20% stake to a foreign strategic partner [5].Yanjing is controlled by Hong Kong-listed Beijing Enterprises Holdings, whose largest shareholder is an investment arm of the Beijing government. This alternative has a number of advantages. First, the opportunity to invest and partner with a major local player is rare. The local knowledge gained will be invaluable for AB InBev. Also, assuming a 50% premium on top of Yanjing’s current trading price of about US$1.11 USD per share, the 20% stake will only cost around US$ 0.93 Bn, which exerts little financial pressure to AB InBev. In terms of drawbacks, it is uncertain whether the government will intervene in AB InBev’s involvement in the strategic partnership. Also, it will provide little benefit in terms of economies of scale in Asia. Alternative #4 Joint Venture with FEMSA – Further Expand Latin America Exposure The benefit of engaging in joint ventures is to expand in Latin American markets and achieve cost reduction. Latin American market accounts for 16% of the world’s beer volume, and has an average growth of 3.3% in the last ten years. Through creating a joint venture with a competitive partner, AB InBev can reduce costs by sharing marketing channels and market intelligence, etc. A good candidate for a joint venture is Fomento Económico Mexicano (FEMSA) from Mexico. FEMSA has a significant market share throughout Latin America, but is facing declines in volume in some markets, and they would welcome a partner to create a win-win situation in the highly competitive market. Together, the two companies represent over 90% market share in Mexico and 76% in Brazil. Therefore, the alliance can create an unparalleled market power to enhance brand influence and strengthen distribution. However, it needs to be evaluated carefully due to difficulty in executing a successful joint venture. Alternative #5 A Merger with SABMiller – Creating the True GlobalNumber One Beer Brand Another bold, extremely attractive and our chosen alternative is to merge with the company’s archrival – SABMiller. SAB Miller, currently our most immediate competitor with a comparative market share of 16.4%, sold the second most beer volumes in 2015[6] and achieved a world total revenue of US$16.5 Bn. Through a variety of brand names in their portfolio, the company has a presence in all five continents, but in a very complimentary way to our company’s exposure. By establishing leading local beer brands in multiple geographic segments, SAB has conquered 94% of global lager volumes [7].Being the largest licensed bottler and distributor of the Coca-Cola products outside of the U.S., the company's long term relationship with the soft drink giant allows them to diversify SAB Miller Financials in a Glance FY 2015 Revenue 16.5 Bn 5-yr Revenue CAGR 3.30% FY 2015 EBIT Margin 26.52% FY 2015 FCF 2.15 Bn Data Source: SAB Miller Filings
  11. 11. 10 product offering and improve capital efficiency by co-sharing excess capacity with the Coke. In FY2015, SAB Miller’s operation in developing markets that comprised of Latin America, Asia, and Africa accounted for 75% of cash flow generated globally, while demand from other two markets – North America and Europe are fairly stable. On the corporate level, the company has adopted a capital structure that is less aggressive and healthy. In the most recent period, the company maintained market D/E of 12%. In fact, to merge with SAB Miller present compelling strategic rationale. Given the similar characteristics from being the world #1 and #2 player in the industry, AB InBev and ABMiller have some similar strength such as owing diverse product portfolio, and face similar opportunity and threat. However, it is the different yet highly complementing strengths and weaknesses lead to the unique opportunity to create value for the combined entity. In term of strength, SAB Miller has a strong presence in growing markets, especial in Africa where our company lacks. On the contrary, the unique weakness for SAB Miller is their inability to break into Brazil market where we have strong position. Actually, the market presence between the two companies is highly complementary as discussed in earlier and more directly shown in the figure on the right. There, the combination can create a portfolio of the world's most the influential beers across all the major continents. In addition, the combined entity can benefit from the scale economies through combined procurement, resources pooling, expertise sharing, and general cost cutting. Combined together, massive unique synergies from the cost side can be realized, and market power can be consolidated; not to mention the potential revenue synergies. If successful, such merger will create a true No. 1 global beer company in the industry. But it is noteworthy that the potential financial pressure such deal may impose to AB InBev is immense, not to mention other obstacles like regulatory scrutiny. Strategic Alternative Conclusion To properly assess these alternatives, we weigh each alternative’s benefits and costs against the long term success factors to AB InBev as following: Factors Alternatives Diverse Brand Portfolio Effective Distribution Economies of Scale Financial Flexibility Difficulty to Execute #1 Organic Growth D E E A A #2 Acquire Diageo’s Brewing Business C C D C B 0% 20% 40% 60% 80% 100% AB InBev SAB Miller Major 1 Major 2 Other Constrasting Global Market Shares
  12. 12. 11 #3 Invest in Beijing Yanjing Brewery D C C B C #4 Joint Venture with FEMSA D B D B D #5 Merger with SAB Miller A A A D E Note: A=Excellent,B= Good, C=Fair, D= Poor, E= Very poor Overall, the table shows an outcome that clearly separate the merger with SAB Miller out of the crowd. Despite the difficulty in execution and possible burdens to AB InBev’s financial flexibility, this particular alternative can create most positive impact to the company’s long-term strategic goals. Therefore, while keeping options open for other alternatives, a merger with SAB Miller would be the top choice of AB InBev. With transaction at such scale and with such difficulty, risks and potential means to mitigate them are of top issues, which will be analyzed in the later section of this report.
  13. 13. 12 IV. VALUATION A deal will not be a good deal unless it is done at the right price. To best estimate the fair price for SAB Miller, we use public comparable, precedent transaction, as well as the discounted cash flow valuation method to triangulate value of the company. Relative Valuation Approach – Trading Comparable Analysis Trading comparable analysis has a simple rationale: similar firms should be worth similar multiples. Also, acknowledging the uniqueness of different companies, benchmarking and adjustments are conducted to properly evaluate the value of SAB Miller under this analysis. Comparable companies (Table B.1) were selected based on four dimensions: firm size, growth, maturity and profitability (as shown in chart below). And the peers were selected from three major groups: 1) major players in the global brewery industry, 2) local leaders in beer production, and 3) global leaders in beverage production. Comparable Peers Benchmarking Specifically, the scale and business exposure of global players provide comparability on business growth for SAB Miller. And the beer manufacturing focused local brewers provide a pure relative measurement for the brewery segment. Furthermore, the wine, spirit, and soft drink manufacturing industries are key competitors to the beer manufacturing industry, where the comparison between market leaders and non- leaders can provide some indications on size premium. Size Benchmarking The significant presence in the beer manufacturing industry assures SAB Miller stability in revenue generation and sustainability in the long run. Operationally, a relatively large firm size also helps achieve economy of scale and gain operation efficiency through cost reduction. Accordingly, we suggest SAB Miller a size premium of 1.0x to 1.5x above the industry average. In addition, SAB Miller keeps a financial health
  14. 14. 13 with 2.2x total debt to EBITDA, which adds financial flexibility to the firm. Growth Benchmarking As shown in Figure B.3 and B.4, Asia, Latin America and Africa demonstrates strong growth potential in beer consumption. SAB Miller is standing as a leader in beer production in the three markets (Table B.3), which can dramatically booster the revenue growth. So we include AB InBev, Kirin and Diageo in our portfolio with cumulatively 57%, 92.7% and 43.4% revenue generated from the three markets respectively (SAB Miller 76%). Similarly, the selected comparable firms all have invested in innovations in beer styles and flavors to capture the recent consumer demographics shift to the younger generation, which provides another source of growth and is already imbedded in the multiples. Maturity Benchmarking SAB Miller is defined as a mature company with 94% of total volume sold in markets where it has top 2 national market share position and 25% EBITDA from associates and joint ventures. Thus, Sales, EBITDA and EBIT are continuous and stable for SAB Miller. Since the brewery industry is at its mature stage, companies, such as Heineken, Asahi, and Carlsberg, are all at its maturity stage. SAB Miller should relatively locate itself in the average position under the maturity benchmarking. Profitability Benchmarking Given the competitive landscape, SAB Miller has kept an average total revenue growth and EBITDA growth among its industry peers. However, its EBITDA margin (33.96%) and EBIT margin (26.52%) in last fiscal year is far above the peer average (22.01% and 15.82%, respectively), which is mainly attributed by SAB Miller’s excellent cost-cutting potential and execution. (See Table B.4 and Figure B.6). Comparable Analysis Summary Overall, according to the four benchmarks discussed above, SAB Miller outperforms its peers’ average with respect to firm size and profitability. Taking these into consideration, we propose that SAB Miller can generate an as-is market value from US$66.4 Bn to US$112.7 Bn, which is US$84.1 Bn on average without the control premium. (Table B.10) Relative Valuation Approach – PrecedentTransaction Analysis While precedent transaction and trading comparable analyses have the similar underlying rationale, the difference is precedent transaction method automatically incorporate control premium and subject to the market condition of at the time comparable transactions took place. Various adjustments were also made to arrive our target SAB Miller multiples. The selected transaction pool consists of 12 merger and acquisition events within the beer manufacturing industry in past five years from 2011 to early 2015. According to Table C.1, the acquirer company tends to award a greater premium to target companies with larger firm size, which is also consistent with our previous
  15. 15. 14 findings in the comparable analysis. Among all target firms, Modelo Beer and Fosters Beer who have had the highest deal size of US$15.7 Bn and US$12.6 Bn, respectively, were purchased at EV/EBITDA multiple of 16.0x and 13.0x respectively. Therefore, SABMiller, as the industry 2nd player, should be assigned an even higher multiple. On the other hand, historically, the average premium added to precedent transactions of the beer manufacturing industry peaked 50% back to Q3 2012(Table C.2) and averaged at 22.96% over a five- year period. The heated M&A market of beer manufacturing industry indicates that a reasonable premium should be added to the SABMiller valuation. Overall, with the consideration of the hot market condition and a significant size premium, here we adopt an EV/EBITDA multiple of 19.0x and P/E multiple of 23.0x for SABMiller. The enterprise value of SAB Miller given by precedent transaction analysis is US$97.8 Bn on average. (Table C.3 and C.4) Intrinsic Valuation Approach – Discounted Cash Flow(DCF) Analysis The discounted cash flow analysis first values SABMiller as a stand-alone company on an as-is basis and with improvements, then values SABMiller as acquired by AB InBev, a valuation taking into considerations value of synergies and future options. Valuation on As-Is Basis For as-is basis, the two main value drivers of SABMiller are the low cost of capital and top-line revenue growth. First, the cost of equity is calculated (Table D.1) using the 10-year treasury rate as of March 31, 2015, which reflects the long-term nature of cash flows that are to be discounted. The market return is calculated using the annual MSCI Index returns from 2011 – 2015. SABMiller's cost of equity is 7.91% based on the CAPM model. Second, the cost of debt is the average cost of debt for the period 2011 – 2015(Table D.2), and 0 20 40 60 80 100 120 140 Market Value As-Is Valuation (DCF) With Self Improvements (DCF) With Unique Synergy (DCF) Maximium US$88.0 B US$76.8 B US$9.6 B US$22.0 B Future Oppo. DCF Valuation Summary
  16. 16. 15 the cost of debt for each year in that period is calculated by dividing the current year's interest expense by the previous year's debt. The resultant cost of debt is 4.47%. Hence, the company's WACC is 7.34 %( Table D.3). In major developed countries, lager volume growth has been negative over the past two years. In Europe, SABMiller would buy Meantime Brewing Company, a craft brewer outpacing the UK beer market’s 1% growth, to enter UK craft beer market [7]. However, the Euro is expected to remain weak relative to the US dollar, and economic uncertainty is expected to be high in the next six years. Overall, the revenue growth rate in Europe is expected to be -0.50% for 2016 and its annual incremental change is 0.25%. The revenue growth rate in Europe is expected to approximate the global beer industry 0.8% by 2021(Table D.4). The revenue growth in North America has been relatively stable and, therefore, the revenue in North America is expected to grow moderately, with a growth rate of 0.5% for 2016 and its annual incremental change of 0.15 % (Table D.4). On the other hand, the revenue growth potential in developing countries is high. In Africa, SABMiller would continue to invest in capacity including expansions in Ghana and Nigeria which are nearing completion[7] ; the benefits from expansion are expected to emerge in 2018. The revenue growth rate in Africa for 2016 and 2017 are 1.00% and 2.00% respectively, it would boost to 7.00% in 2018 but then decrease by 1.6% annually until 2021(Table D.4). In Latin America, lager pricing and growth in the premium and above mainstream categories, together with strong soft drinks volume growth, are expected to continue in the next six years. The revenue growth in Latin America for 2016 is expected to be 1.00% and its annual incremental change is 0.75 %( Table D.4). In China, CR Snow, a beer brand of China Resources Enterprise which SABMiller has a partnership with, is expected grow steadily through its premiumisation strategy. In Australia, however, consumer sentiment would remain subdued with continued pressure on consumer spending affecting beer category volumes. Overall, the revenue growth in Asia Pacific for 2016 is expected to be 0.50% and its annual incremental change is 0.40 %( Table D.4). Other assumptions could be found in Table D.5, the DCF analysis arrives at an enterprise value of US$76.8 Bnin the case of As-Is valuation(Table D.6&D.7). The sensitivity table indicates that the enterprise value of Square largely falls in the range from US$69.6 Bn to US$85.9 Bn (Table D.8). Valuation with Improvements SABMiller could further enhance its revenue by increasing the supply of soft drinks in Africa through a partnership with local or global beverage companies, since the soft drinks volume has been rising by 9% annually over the past two years in Africa. After taking into accounts SABMiller's pricing strategy as well as the weakness of key currencies in Africa, a parallel increase in revenue growth rate by 0.25% every year is considered conservative, increasing the enterprise value of SABMiller by US$1.48 Bn. Also, SABMiller had increased its target annual run rate cost savings from its cost and efficiency program announced in May 2014, from USUS$500 Mn by 31 March 2018 to at least USUS$1,050 Mn by 31 March 2020[7]. Assuming that the cost savings program would be successful, annual incremental change in EBIT/Revenue in every region is expected to be 0.6%. It would increase the value of SABMiller by US$8.14 bn.
  17. 17. 16 As a result, the DCF analysis arrives at an enterprise value of US$86.5 Bn in the case of valuation With Improvements (Table D.9). The sensitivity table indicates that the enterprise value of Square largely falls in the range from US$71.0 Bn to US$87.5 Bn (Table D.10).The capital expenditure schedule and the net working capital schedule can be found in Table D.11 and D.12 respectively, while the pro forma condensed balance sheet and the pro forma income statement can be found in Table D.13 and D.14 respectively. Valuation with Unique Synergies Other than the possible increase in the valuation on a stand-alone basis, the combined company will certainly generate attractive synergies that cannot be achieved without the M&A transaction. To quantify the pre-tax cost synergies, we made a few assumptions shown in below table. Estimation will not take into account any potential synergies or dis-synergies arising from SABMiller’s non-consolidated interests, including its joint ventures and associates. No material impact on the underlying operations of either company or their ability to continue to conduct their businesses No material change to macroeconomic, political or legal conditions in the markets in which two companies operate that materially impact on the implementation or costs No change in tax legislation or tax rates or other legislation or regulation in the countries in which two companies operate that could materially impact the ability to achieve any benefits. The unique cost synergy between the two companies are expected to arise from following aspects: The combined group can benefit from the economies of scale through combined sourcing of raw materials and packaging and reengineering of associated processes. We projected that this improvement will lower the net working capital to revenue ratio by 5% on the global basis. The new company can take advantage of AB InBev’s well-known cost cutting strategy and cut the distribution cost through the alignment of brewery, bottling and shipping productivity including: reduced water and energy usage, as well as optimization of other brewery and distribution processes across geographies. This is expected to lower the operating cost to improve the EBIT margin by 1% and decrease the capital expenditure growth rate by 2% on the global basis after the transaction accomplished. AB InBev and SABMiller can share best practices relating to cost management, efficiency improvements and productivity enhancements across administrative operations of the new company. Because the two companies have huge overlapping business especially in North America, and Asia, we expect the new company can realign the administrative costs across the combined group by consolidating the regional headquarters and redundant equipment. Therefore, after the adjustment stated above, we further modified the cash flow forecast by increasing the EBIT margin by 2% and decreasing the capital expenditure growth rate by 1% in these two areas. In unique revenue synergy can be created through the utilization of the combined portfolio of leading global, national and local brands and by leveraging the talent pool of both companies. Therefore, we project the revenue growth rate will at least increase by 0.5% on the global basis after the M&A deal accomplishes.
  18. 18. 17 Furthermore, one of the most important and evident benefits of this potential M&A transition is to bring together a largely complementary geographic footprint with access to high-growth regions like Africa, Asia & South America. Builds on SABMiller’s heritage in this area, the combined company can realize considerable growth in these emerging market. Therefore, in addition to the 0.5% increase on global basis, we further improve the revenue growth by 0.5% in those states. After the several modifications above, we can easily recalculate the firm value using the discount cash flow model. Compared to the estimated firm value after self-improvement, by adding both cost reduction and revenue enhancement synergy, estimated EV of SABMiller can be increased by US$21,961M to US$ 108.42 Bn, with the equity value and share price increase to US$96.84Bn and US$57.79, respectively. Triangulate SAB Miller’sFair Value Above figure summarizes the results of the three valuation methods. Obviously, the precedent transaction analysis provides us with the most conservative valuation of US$97.8bn and the highest valuation comes from the DCF analysis about108.4bn. Triangulate between these results, we find the reasonable valuation agreed by all methods should fall between US$95bn and US$105bn, with the share price ranges from US$49.78 and US$55.75 correspondingly.
  19. 19. 18 V. HURDLES, RISKS & ACTION PLAN Major Challenges and Potential Mitigation Antitrust Scrutiny As the world’s two largest brewers, two companies together will take almost a third of the world's beer market share. Therefore, to make the deal go through smoothly, AB-InBev will face antitrust scrutiny around the world and the deal could take up to 1 year to close. AB-InBev will have to navigate scrutiny and jurisdiction of US and China, where both the two companies have a major presence. In addition, the combined company may also have to make some small scale disposals in other markets such as Peru, Ecuador, Argentina, UK, Netherlands and Italy. In the US, a combined group can bring arch rivals Budweiser and Miller under the same roof and take 78% of the market share. Thus, in order to proactively address regulatory considerations, divestments are inevitable. We would assume that the 58% SABMiller stake in MillerCoors in the US would have to be sold to its joint venture partner, Molson Coors. The combined company might need to make a similar concession to regulators in China, where SABMiller holds a 49 percent stake in a joint venture that owns China Resource Snow, China’s best-selling beer brand (23% market share). We would expect that ABI/SABM would also choose to dispose the SABMiller stake in China Resources Snow to address regulatory requirement. Delays in South Africa AB InBev is well-known for its cost cutting strategies, which alarmed labor union who was worry that AB InBev might think of cutting jobs as an attempt to reduce costs. Since South Africa has an unemployment rate of 25%, the government has a track record of delaying deals while imposing strict conditions to prevent job losses. In addition, the government may block the deal if it leads to tax base erosion. Potential Conflict of Interest Last but not least, conflict of interest may rise from the two companies’ partners. SABMiller is an important bottler for Coca-Cola in Africa. This would conflict with AB InBev’s partnership with PepsiCo as a bottler for the soft drink company in Latin America. Risksand Concerns Credit Risk In order to facilitate the M&A process, AB InBev will have to pull all possible levers to create value from the acquisition. Due to the large scale of this takeover deal, it is inevitable for our company to raise a considerable amount of debt. Based on our valuation, the issuance of bond might bring AB InBev’s net debt to four and a half times greater than its EBITDA. This will greatly increase the company’s leverage and cause surging concern of bondholders.
  20. 20. 19 Risk of Overpay It's well-known that about 70% to 90% of all M&A deals don't meet their objectives. Given its operating metrics are already a lot above than industry averages, implying the difficulty to further improve the business. Therefore, we may fail to achieve the expected synergy and improvements. Action Plan The action plan is separated into short-term and long-term. The 10-week action plan includes approaching the SABMiller board of directors, conducting due diligence, and negotiating the deal price. We forecast the wait for regulatory clearance to be approximately 6 months. The long-term action plan portrays activities upon receiving regulatory clearance, including consolidating ownership of AB InBev and SABMiller through the establishment of Newco, financing the deal with a combination of debt and equity, effective post-merger integration, and specific post-merger business actions. The cumulative action plan time frame is 40 weeks. Approach SABMiller Board of Directors This stage is expected to take 3 weeks. Initial contact will be made, followed by signing of confidentiality agreement and distribution of the confidential information memorandum. Management presentation will then be made, highlighting the opportunity for SABMiller. The approach stage will conclude with an exclusivity period for transaction negotiation as well as a definitive agreement. Due Diligence In conducting due diligence, emphasis will be put on the analysis of SABMiller’s business and operations, evaluation of its financial health, legal review of relationships, as well as assessment of risks and opportunities. 5 5 5 4 2 2 4 15 1 24 3 4 3 0 5 10 15 20 25 30 35 40 45 Large scale marketing campaign Utilization of African distribution channels Localized R&D Effective communication Cultural integration & staff retention Organization structure & executive selection Designated integration manager Integration planning NewCo Establishment Regulatory Clearance Price negotiation Due diligence Approach Weeks Action Plan
  21. 21. 20 This thorough dig-down enables us to answer key questions including “Is the beer industry attractive?”, “Are the competitive dynamics attractive?”, and “Are SABMiller’s internal capabilities strong?” The business and financial analysis have been covered in the previous sections of this report. Legal review is closely tied to the revelation of risks in this specific deal, as anti-trust regulations triggered by some of SABMiller’s holdings present major challenges to the completion of the transaction, a preliminary review can be found in the Hurdles and Risks part of this report. Accumulation and analysis of related information are required to derive implications of those relationships, which will then enable effective action to be taken, such as divesting SABMiller’s interests in some of those holdings. The due diligence process is expected to take 4 weeks, after which a detailed risk mitigation plan should be laid out to cope with the major risks and hurdles identified. Price Negotiation Based on self-improvements and synergies in addition to its current operations, SABMiller is valued at US$108.4 Bn, which we set as the walk-away price, considering synergies are difficult to achieve. As SABMiller is currently trading at US$87.96 Bn, we price the opening offer at US$90 Bn. Our target price is US$99.6 Bn, derived from SABMiller’s status quo, assuming 90% of their self-improvements and 60% of combined synergy can be achieved. Negotiation is expected to take 4 weeks, upon completion of due diligence. In attempts to negotiate for a lower price, we can leverage the fact that given SABMiller’s size, AB InBev is one of the few, if not the only one, with the capacity to complete a deal of this scale. With little competitors, we can effectively avoid a bidding war. Moreover, a choice is given to SABMiller’s current shareholders in terms of payment method, in which the Partial Share Alternative allows them to choose either cash or shares. This flexibility of payment method should also help lower the price. Finally, upon completion of the transaction, we intend to retain a large proportion of SABMiller’s current management team, and introduce employee stock options to incentivize key talents. These attempts to ensure a smooth transition of management and operations also call for a lower deal price. Deal Structure Valuation of SABMiller’s share equity at US$108.4 Bn consists of cash and shares. Considering the scale of the transaction, debt is required to finance the cash portion of the deal, in addition to utilization of AB InBev’s internal financial resources. The recommended deal structure consists of 5% cash, 35% shares, and 60% debt. With the current net debt to EBITDA ratio of 2.5 times, AB InBev has sufficient debt capacity, be it bank loans or bond issuances, to finance the deal. Bank loans are recommended since they can generally be borrowed at lower rates than corporate bonds. Net proceeds from the sale of SABMiller’s interests in MillerCoors and the global Miller brand will be used to pay down loans. Considering the short-term nature of bank loans as well as the interest environment, the loan facilities will later be refinanced through bond issuances. Despite the increased interest rates from near-zero level, the continuingly low level depicts a compelling situation for utilization of debt, which also brings interest tax shield benefits.
  22. 22. 21 Newco After receiving regulatory clearance, ownership consolidation of the two companies is expected to take 1 week. SABMiller will first form a new company, Newco, which will acquire the shares of SABMiller. In exchange, Newco shares will be distributed to SABMiller shareholders. Next, AB InBev will acquire all Newco shares held by former SABMiller shareholders. Upon completion of the acquisition of shares, AB InBev will merge into Newco, so Newco will be the new holding company for the combined group. Post-Merger Integration Post-merger integration is key to effectively realizing the synergies in areas of procurement and engineering, brewery and distribution efficiencies, best practice sharing, and corporate headquarters or overlapping regional headquarters. It is crucial for the planning of integration to start early, while the key to successful implementation is to move fast. Major aspects to address are organization structure and executive selection, cultural integration and staff retention, and communication mechanisms. In managing the above aspects, the role of a designated integration manager is essential to successful post-merger integration. Considering the size of AB InBev and SABMiller, integration will not be an easy task. An integration manager is thus necessary to act as a consultant to former SABMiller employees, facilitate the former SABMiller management team, and be held accountable for achievement of the integration plan. The integration manager should remain effective for the entire 4 weeks of integration. The first aspect to address is organization structure and executive selection. Changes are expected to come into effect within 2 weeks to minimize turbulence. Having a local board in South Africa would be critical to the future success of the combined company, as being able to break into the African market is a major rationale for the deal. The regional headquarters of the combined company for the African continent should be maintained in Johannesburg, since geographic proximity to the proposed Johannesburg Stock Exchange will likely benefit the company’s capital markets performance. As for executive selection, AB InBev should retain a large proportion of SABMiller’s current management team, especially in the African regions, due to their familiarity with local operations and consumption habits. The second aspect to address is cultural integration and staff retention. Due to the largely complementary geographic footprints of AB InBev and SABMiller, the corporate cultures should be comprehensively integrated rather than maintained separately. As a cross-border transaction, particular attention should be paid to the cultural differences between the two companies, including practices of business conduct, behavioural norms, and leadership styles. However, provided the global nature of both AB InBev and SABMiller, it should not be a difficult task for people from both companies to adopt a common set of beliefs and practices. Regardless of whether the two cultures can successfully integrate, staff retention poses a major concern as key employees may be lost during times of change and uncertainty. Thus, employee stock option plans should be offered to prevent key personnel from walking away. The final aspect to address is effective communication between the combined companies, which should be ongoing throughout the 4-week integration period. Initially, broad level corporate changes should be
  23. 23. 22 communicated throughout the organization in a timely manner to reduce uncertainties to employees. In the months following the completion of the deal, more frequent regional meetings should be held to effectively convey information between the two companies in non-overlapping operational regions, while departmental meetings should be held in overlapping areas. Business Actions Due to market saturation, slow growth has been characterizing the North American beer market for a number of years, while the African market is experiencing rapid growth. According to the BCG matrix, the North American market is a cash cow while the African market is a star, making it in the company’s best interest to deploy cash from the North American operations to support further development in the African market. Specifically, we propose the establishment of a new research and development lab in South Africa, utilization of SABMiller’s African distribution channels, and launch of large-scale marketing campaigns in Africa. These business actions will be implemented upon completion of the ownership consolidation. The first business action we propose to the combined entity is propelling localized research and development in Africa. SABMiller’s R&D has mainly focused on improving the sustainability of the brewing process, while AB InBev’s innovation labs have introduced tasting tours in addition to their product line innovation activities [8]. To capture the African market and make appearance of the combined company, AB InBev and SABMiller should thus establish a new research and development lab in South Africa, which will allow better product innovation based on local tastes and sustainability measures based on the local environment. With the innovative products that R&D brings, we have the building blocks to effectively capture the African market. The next step is to utilize SABMiller’s African distribution channels for product placement. This is essential to not only selling the new products, but more importantly, allowing the core AB InBev product lines to break into the African market. In addition, a large-scale marketing campaign is recommended to fully publicize the newly entered products in increasing local consumers’ tendency to make purchases. With the product, place, and promotion in place from the proposed business actions, we will be able to effectively market the products.
  24. 24. 23 VI. CONCLUSIONS AND RECOMMENDATION Considering the fact that the beer manufacturing industry is characterized by intense rivalry as well as increasing threat from new entrants and substitutes, it is increasingly pressing for AB InBev, a leading global beer manufacturer to maintain its current competitive position. Five strategic alternatives have been crafted to propel AB InBev’s growth: organic growth, acquisition of Diageo’s brewing business, investment in Beijing Yanjing brewery, joint venture with FEMSA, and merger with SABMiller. Due to the unparalleled portfolio, complementary geographic footprint, and massive synergies to be created, SABMiller presents itself as the most attractive alternative of all. The merger is thus recommended. In valuing SABMiller, discounted cash flow analysis gives an enterprise value of US$108.4 Bn while the valuation range falls within US$99.1 Bn to US$122.8 Bn with sensitivity analysis. Comparable company analysis gives a range of US$93.3 Bn to US$106 Bn, and precedent transactions analysis gives a range of US$102.4 to US$119.5 Bn. With triangulation, the target deal price is US$99.6 Bn, assuming 90% of SABMiller’s self-improvements and 60% of the synergies are achieved. The recommended opening offer is US$90 Bn, as SABMiller is currently trading at US$87.96 Bn, with US$108.4 Bn from the DCF analysis as the recommended walk-away price. Despite financial soundness of SABMiller as a target, the deal may be subject to some risks and hurdles, of which regulatory scrutiny is a major concern. An action plan is crafted so that in the short-term, AB InBev is recommended to approach the board of SABMiller, conduct due diligence that will effectively reveal and assess all barriers, and negotiate an appealing price. In the long-term, upon receiving regulatory clearance, thus clearing a major hurdle, the action plan gives direction in structuring the deal with largely debt, steps to ownership consolidation, strategy for effective post-merger integration, and specific business actions to cultivate a stronger presence in Africa. The Success of this deal will enable AB InBev to become the number one player in all markets, as a result of more efficient practice, creation of a portfolio of the most valuable brands, discover new growth through complementary geographic footprints, and enhanced utilization of excess capital.
  25. 25. 24 APPENDIX Appendix A: Porter’s Five Analysis on Global Beer Manufacturing Industry Factor & Rating Explanation Threat of New Entrants (Moderate to High) The threat of new entrant to the industry has been growing. Such situation was a result of the combination of consumer shift tastes to craft beers and innovations in the industry reduces the capital investment required to establish a beer brewer. Buyers’ Power (Weak to Moderate) On a global basis, independent grocery stores are the number one channel, representing about 50% of industry revenue. Other channels includes hospitality sector and supermarkets. Overall, the buyers’ power is weak to moderate. Suppliers’ Power (Weak to Moderate) The major inputs for manufacturing beers are raw materials like aluminum and wheat. These commodities providers have relative low bargaining power over beer manufactures. Threat of Substitutes (High) The primary substitutes of beer are beverages such as wine and spirits. Consumer taste are always changing, culture background and regulation can also make consumers to shift to other substitutes. Rivalry (High) In addition to sluggish growth expectation for the industry, there is also high concentration of market shares by major players, with top three players in the industry control about 68% global market shares in 2015 based on IBISWorld Revenue industry revenue estimation6. However, the basis of competition is primarily on brands and marketing rather than price. 3.5 2.5 2.5 4 4 Threat of New Entrants Buyers’ Power Suppliers’ PowerThreat of Substitutes Rivalry Porter's 5 Analysis Visualization Note: the higher the rating, the more infavorableof the industry
  26. 26. 25 Appendix B: Comparable Analysis Table 1: Comparable Companies Comparable Companies (USD in Bns, except per share data) Enterprise Value/ Total Price/ Equity Enterprise 2015 2016E 2015 2016E 2015 2016E Debt/ 2015 2015 Company Ticker Value Value Sales Sales EBITDA EBITDA EBIT EBIT EBITDA EPS Volume SABMiller plc SAM LN 77.2 87.9 3.9x 4.9x 15.3x 19.0x 20.2x 24.1x 2.2x 25.5x 162.6 Tier 1: Global Brewer Anheuser-Busch InBev SA/NV ABI BB 199.9 246.0 5.6x 5.3x 14.5x 13.7x 17.7x 16.8x 2.9x 24.6x 437.5 Diageo DGE LN 79.7 96.7 5.7x 5.5x 19.1x 17.0x 21.8x 19.2x 3.1x 19.4x 359.8 Heineken N.V. HEIA NA 48.8 62.9 2.8x 1.9x 12.1x 7.8x 18.4x 10.9x 2.7x 23.8x 1598.7 Asahi Group holdings Ltd. 2502 JT 14.5 17.8 1.2x 1.1x 10.4x 9.8x 15.9x 14.5x 2.1x 22.9x - Carlsberg A/S CARLB DC 13.6 18.9 1.9x 2.0x 31.0x 10.4x - 15.7x 8.8x - 103.2 Mean 71.3 88.5 3.4x 3.2x 17.4x 11.8x 18.5x 15.4x 3.9x 22.7x 624.8x Median 48.8 62.9 2.8x 2.0x 14.5x 10.4x 18.1x 15.7x 2.9x 23.3x 398.6x Tier 2: Market Concentrated Brewer Kirin Holdings Company Ltd. 2503 JT 12.5 20.5 1.1x 1.1x 10.1x 9.3x 19.9x 16.5x 3.1x .0x - Molson Coors TAP US 18.2 20.7 5.8x 6.5x 24.8x 12.5x 39.8x 35.1x 3.5x 25.0x - The Boston Beer Company, Inc. SAM US 2.6 2.5 2.6x 2.2x 12.7x 10.8x 16.2x 13.7x .0x 28.2x - Mean 11.1 14.6 3.2x 3.3x 15.9x 10.9x 25.3x 21.8x 2.2x 17.7x Median 12.5 20.5 2.6x 2.2x 12.7x 10.8x 19.9x 16.5x 3.1x 25.0x Tier 3: Global Beverage Manufacture The Coca-Cola Company KO US 185.8 210.3 4.7x 5.2x 19.7x 15.3x 24.1x 18.4x 4.1x 21.0x - Nestle SA NSRGY US 230.0 247.1 2.6x 2.7x 15.1x 12.8x 18.9x 15.8x 3.1x 25.7x - PepsiCo Inc. PEP US 145.6 167.0 2.7x 2.6x 15.5x 17.7x 20.0x 21.0x 1.3x 21.7x - Mean 187.1 208.1 3.4x 3.5x 16.8x 15.3x 21.0x 18.4x 2.9x 22.8x Median 185.8 210.3 2.7x 2.7x 15.5x 15.3x 20.0x 18.4x 3.1x 21.7x Overall Mean 86.5 101.0 3.3x 3.3x 16.8x 12.5x 21.3x 18.0x 3.2x 21.2x 624.8x Median 48.8 62.9 2.7x 2.6x 15.1x 12.5x 19.4x 16.5x 3.1x 23.3x 398.6x Source: Bloomberg
  27. 27. 26 Table 2: Beer Production Volume Company Volume SABMiller plc 324 Annual report page 39 Anheuser-Busch InBev SA/NV 457 Annual Report page 4 Diageo 222 Annual reports page 48 and IFC2 Heineken N.V. 30.5 Annual report page 2 AsahiGroup holdings Ltd. - Carlsberg A/S 131.8 Annual report page 11 Volume in Mns of hectoliters Figure 1: Major Players in Wine Segments Figure 2: Major Players in Beverage Segments Figure 3: Beer Consumption by Region
  28. 28. 27 Figure 4: World’s Fastest Growing Beer Markets Table 3: Revenue by Region Geographic Region SAB Miller AB InBev Diageo Heineken Asahi Carlsberg Kirin Latin America 35% 49% 10% 8% Africa 29% 13% 15% Asia Pacific 12% 8% 21% 12% 100% 28% 84% Europe 11% 6% 24% 48% 72% 7% North America 13% 37% 32% 24% 100% 100% 100% 100% 100% 100% 100% Source: Bloomberg and Company Annual Report * Carlsberg: Europe figure includes both Western Europe (53%) and Eastern Europe (19%). Figure 5: Revenue by Region 0% 20% 40% 60% 80% 100% Latin America Africa Asia PacificEurope Northe America Revenue by Geographic Region 2015 SAB Miller AB InBev Diageo Heineken Asahi Carlsberg Kirin
  29. 29. 28 Table 4: Profitability Benchmarking Company Total Revenue Growth 2015 EBITDA Growth 2015 EBITDA Margin 2015 EBIT Margin 2015 SABMiller -1.02% 1.67% 33.96% 26.52% AB InBev -7.35% -7.42% 38.85% 31.89% Diageo 5.41% 3.92% 29.68% 25.99% Heineken 6.51% 10.72% 22.76% 14.99% Asahi 4.03% 2.36% 11.11% 7.27% Carlsberg 1.31% -6.45% 6.29% -0.87% Kirin 0.05% -6.26% 11.23% 5.68% Molson Coors -13.96% -19.56% 23.44% 14.63% The Boston Beer 6.30% 9.55% 20.74% 16.27% Average 0.14% -1.27% 22.01% 15.82% Figure 5: Profitability Benchmarking -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% SABMiller AB InBev Diageo Heineken Asahi Carlsberg Kirin Molson Coors The Boston Beer Average Total Revenue Growth 2015 -30.00% -20.00% -10.00% 0.00% 10.00% 20.00% SABMiller AB InBev Diageo Heineken Asahi Carlsberg Kirin Molson Coors The Boston Beer Average EBITDA Growth 2015 0.00% 10.00%20.00%30.00%40.00%50.00% SABMiller AB InBev Diageo Heineken Asahi Carlsberg Kirin Molson Coors The Boston Beer Average EBITDA Margin 2015 -10.00% 0.00% 10.00% 20.00% 30.00% 40.00% SABMiller AB InBev Diageo Heineken Asahi Carlsberg Kirin Molson Coors The Boston Beer Average EBIT Margin 2015
  30. 30. 29 Table 5: Relative Valuation Multiple Enterprise Equity Diluted Price (USD in billions, except per share data) Value Value Shares Out. per Share Column1 Column2 Column1 2015E 2016E Average P/E 94.1 80.4 1.676 48.01 Price/Earnings Net income 3.3 3.7 EV/Sales 80.0 66.4 1.676 39.62 Assumed Multiple 22.7x 23.5x 23.1 EV/EBITDA 93.3 79.7 1.676 47.57 Equity value 74.1 86.8 80.4 EV/EBIT 94.8 81.2 1.676 48.44 EV With Price P/Volume 126.4 112.7 1.676 67.28 25% Control Per EV/Sales Net revenue 16.5 16.7 Column1 Column2 Column3 Column4 Column5 Premium Share Assumed Multiple 4.8x 4.8x 4.8 High 126.4 112.7 67.3 157.9 94.3 Enterprise value 80.2 79.9 Low 80.0 66.4 39.6 100.0 59.7 Net Debt 12.5 14.7 13.6 Average 97.7 84.1 50.2 122.1 72.9 Equity value 67.6 65.2 66.4 Trading 114.0 100.4 59.9 EV/EBITDA EBITDA 5.7 5.9 5.8 Assumed Multiple 18.3x 14.0x 16.1 Enterprise value 104.2 82.4 Net Debt 12.5 14.7 Equity value 91.7 67.7 79.7 EV/EBIT EBIT 4.5 4.5 Assumed Multiple 22.8x 19.5x 21.1 Enterprise value 101.6 88.0 Net Debt 12.5 14.7 Equity value 89.0 73.3 81.2 Price/Volume Volume 324 366 Assumed Multiple 300.2x 350.2x 325.2 Equity value 97.3 128.2 112.7 SABMiller Relative Valuation
  31. 31. 30 Appendix C: Precedent Transaction Analysis Table 1: Precedent Transactions Acquirer Target Date Target EV/EBITDA Target P/E Price USUS$ bn ABI OB Korea Jan-14 11.0x 13.6x 5.8 Heineken Unibrew Jul-13 9.0x 0.5 Carlsberg Chongqing Mar-13 16.0x 46.0x 0.5 Heineken APB Nov-12 15.0x 35.1x 3.8 ABI Modelo Jul-12 16.0x 18.0x 15.7 AmBev CND Apr-12 13.0x 2.5 Molson StarBev Apr-12 11.0x 11.0x 3.5 AEFES SAB Oct-11 13.0x 1.9 SAB Fosters Sep-11 13.0x 17.9x 12.6 Kirin Schincariol Aug-11 16.0x 5.6 Heineken APB Nov-12 15.0x 3.8 Heineken FEMSA Jan-10 11.0x 7.4 Source: JPMorgan Europe Equity Research Table 2: Beverage Industry M&A Activities Overview Period Deal Count Volume (in Mns) Average Premium SABMiller 77200.0 2015 Q2 5 442.3 14.94% 2015 Q1 6 2014 Q4 6 2014 Q3 1 2014 Q2 2 17.8 2014 Q1 2 5800.0 2013 Q4 6 499.0 2013 Q3 5 506.1 2013 Q2 2 2013 Q1 6 4498.5 26.43% 2012 Q4 4 986.4 1.82% 2012 Q3 6 7124.3 50.62% 2012 Q2 8 21251.7 32.91% 2012 Q1 6 74.9 2011 Q4 8 1905.2 2011 Q3 9 3661.9 2011 Q2 7 15047.3 11.06% 2011 Q1 8 118.1
  32. 32. 31 Source: Bloomberg Table 3: Precedent Transaction Valuation SABMiller Relative Valuation (USD in Bns, except per share data) Column1 2015E Price/Earnings Net income 3.3 Assumed Multiple 23.0x Equity value 75.0 Net Debt 12.5 Enterprise value 87.6 EV/EBITDA EBITDA 5.7 Assumed Multiple 19.0x Enterprise value 108.1 Net Debt 12.5 Equity value 95.6 Table 4: Valuation Results Enterprise Value Equity Value Diluted Shares Out. Price per Share High 108.1 95.6 1.68 57.0 Low 87.6 75.0 1.68 44.8 Average 97.8 85.3 50.9
  33. 33. 32 Appendix D: DCF Analysis Table 1: Cost of Equity Table 2: Cost of Debt Table 3: Cost of Capital Beta 0.85 Risk-Free Rate 1.96% Market Risk Premium 7.00% Cost of Equity 7.91% Cost of Equity 2011 5.42% 2012 4.18% 2013 4.35% 2014 4.14% 2015 4.25% Average 4.47% Cost of Debt As of March 31,2015 (Amount in millions) GBp/USD 1.48289 Number of Shares 1,675,670,012 Equity(Market Value) $87,963.13 Debt(Book Value) $12,544.00 Equity+Debt $100,507.13 Tax Rate 25% WACC 7.34% WACC
  34. 34. 33 Table 4: As-Is Valuation Assumption (1) Table 5: As-Is Valuation Assumption (2) Table 6: DCF Analysis of As-Is Valuation Baseline Assumptions(1) Africa Asia Latin America Europe North America South Africa Corporate Revenue Growth 1.00% 0.50% 1.00% -0.50% 0.50% 0.00% -2.50% Incremental Change in Revenue Growth - 0.40% 0.75% 0.25% 0.15% 0.00% 0.50% EBIT/Revenue 25.00% 19.00% 26.00% 16.00% 8.00% 0.00% 3.00% Incremental Change in EBIT/Revenue 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Capex Growth 9.00% 3.00% 5.02% -3.48% 5.50% 0.00% 0.00% Incremental Change in Capex Growth -1.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3/31/2016 Tax 25.00% WACC 7.34% NWC/Revenue -17.50% NWC(exc.debt)/Revenue -3.83% LT Assets/Revenue 2.50x Depreciation/LT Assests 3.00% Adjustments/EBIT 29.61% Dividend Payout Ratio 44.89% Minority/Income Before Minority 7.25% Baseline Assumptions(2) As-Is Valuation (000's units) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 EBIT (USD$ MM) 4,894.86 4,972.44 5,158.52 5,343.80 5,525.11 5,700.76 EBIT*(1-T) (USD$ MM) 3,671.14 3,729.33 3,868.89 4,007.85 4,143.84 4,275.57 Depreciation(+) (USD$ MM) 1,387.93 1,387.87 1,410.54 1,432.58 1,454.15 1,475.93 Change in NWC(-) (USD$ MM) 30.10 (70.79) (143.09) (139.05) (132.96) (125.73) Capex(-) (USD$ MM) 1,652.76 1,733.00 1,811.35 1,886.39 1,956.74 2,021.13 Free Cash Flow (USD$ MM) 3,376.22 3,454.98 3,611.17 3,693.08 3,774.20 3,856.10 Terminal Value (USD$ MM) 91,495.70 FCF+TV (USD$ MM) 3,376.22 3,454.98 3,611.17 3,693.08 3,774.20 95,351.81 Discount Factor (USD$ MM) 0.93 0.87 0.81 0.75 0.70 0.65 Enterprise Value (USD$ MM) $76,829.59 Net Debt (USD$ MM) 11,579.00 Equity Value (USD$ MM) $65,250.59 Equity Value per Share (USD$) $38.94 Projected DCF Analysis
  35. 35. 34 Table 7: Terminal Growth Value of As-Is Valuation Table 8: Sensitivity Analysis of As-Is Valuation Table 9: DCF Analysis of Valuation with Improvements Terminal Growth 3% Discount Rate 7.34% Terminal Value 91,495.70 PV of TV $59,814.71 Terminal Value 2.50% 2.75% 3% 3.25% 3.50% 6.84% $78,501 $82,400 $86,807 $91,828 $97,600 7.09% $74,225 $77,660 $81,514 $85,869 $90,832 7.34% $70,391 $73,435 $76,830 $80,639 $84,944 7.59% $66,934 $69,647 $72,656 $76,011 $79,776 7.84% $63,800 $66,231 $68,913 $71,887 $75,203 Terminal Growth Discount Factor Enterprise Value($M) As-Is Valuation With Improvements (000's units) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 EBIT (USD$ MM) 4,899.14 5,089.12 5,403.58 5,729.02 6,061.12 6,396.65 EBIT*(1-T) (USD$ MM) 3,674.36 3,816.84 4,052.69 4,296.77 4,545.84 4,797.49 Depreciation(+) (USD$ MM) 1,388.88 1,390.61 1,416.00 1,440.77 1,464.96 1,489.07 Change in NWC(-) (USD$ MM) 27.11 (76.92) (153.06) (150.14) (144.78) (137.81) Capex(-) (USD$ MM) 1,652.76 1,733.00 1,811.35 1,886.39 1,956.74 2,021.13 Free Cash Flow (USD$ MM) 3,383.37 3,551.36 3,810.39 4,001.29 4,198.83 4,403.25 Terminal Value (USD$ MM) 104,478.10 FCF+TV (USD$ MM) 3,383.37 3,551.36 3,810.39 4,001.29 4,198.83 108,881.35 Discount Factor (USD$ MM) 0.93 0.87 0.81 0.75 0.70 0.65 Enterprise Value (USD$ MM) $86,455.97 Net Debt (USD$ MM) 11,579.00 Equity Value (USD$ MM) $74,876.97 Equity Value per Share (USD$) $44.68 Projected DCF Analysis
  36. 36. 35 Table 10: Sensitivity Analysis of Valuation with Improvements Table 11: Capital Expenditure Schedule for DCFAnalysis of Valuation with Improvements Table 12: Net Working Capital Schedule for DCFAnalysis of Valuation with Improvements Table 13: Pro Forma Balance Sheet for DCF Analysis of Valuation with Improvements *NWC(exc.debt)=CA - CL(exc.current debt) **Net LTAssets=LTAssets - LT Non-Interest-Bearing Liabilities 2.50% 2.75% 3% 3.25% 3.50% 6.84% $88,351 $92,803 $97,836 $103,569 $110,159 7.09% $83,475 $87,397 $91,798 $96,772 $102,438 7.34% $79,104 $82,580 $86,456 $90,806 $95,722 7.59% $75,163 $78,261 $81,696 $85,528 $89,827 7.84% $71,591 $74,367 $77,429 $80,825 $84,612 Enterprise Value($M) Terminal Growth Discount Factor With Improvements With Improvements (000's units) FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Capex Africa (USD$ MM) 391.00 663.00 720.00 784.80 847.58 906.91 961.33 1009.40 1049.77 Asia (USD$ MM) 88.00 96.00 80.00 82.40 84.87 87.42 90.04 92.74 95.52 Latin America (USD$ MM) 528.00 413.00 429.00 450.54 473.17 496.93 521.89 548.10 575.63 Europe (USD$ MM) 216.00 252.00 253.00 244.19 235.68 227.47 219.55 211.90 204.52 North America (USD$ MM) 0.00 1.00 15.00 15.83 16.70 17.61 18.58 19.60 20.68 South Africa (USD$ MM) 228.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Corporate (USD$ MM) 28.00 60.00 75.00 75.00 75.00 75.00 75.00 75.00 75.00 Total Capex (USD$ MM) 1,479.00 1,485.00 1,572.00 1,652.76 1,733.00 1,811.35 1,886.39 1,956.74 2,021.13 Capital Expenditure Schedule Projected With Improvements (000's units) FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Net Working Capital (USD$ MM) (2820.00) (4615.00) (2973.00) (2945.89) (3022.82) (3175.88) (3326.02) (3470.80) (3608.62) Change in NWC (USD$ MM) (1,795.00) 1,642.00 27.11 (76.92) (153.06) (150.14) (144.78) (137.81) Projected Net Working Capital Schedule With Improvements (000's units) FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019FY 2020FY 2021 Net Working Capital(exc.debt)* (USD$ MM) (351) (96) (1,012) (645) (662) (695) (728) (760) (790) Net Long-term Assets** (USD$ MM) 46,359 44,625 37,911 42,099 43,198 45,385 47,531 49,600 51,569 Net Assets (USD$ MM) 46,008 44,529 36,899 41,454 42,536 44,690 46,803 48,840 50,780 Debt (USD$ MM) 18,548 17,047 12,544 14,879 13,688 13,391 12,887 12,133 11,102 Equity (USD$ MM) 27,460 27,482 24,355 26,574 28,848 31,299 33,916 36,707 39,678 Net Capital (USD$ MM) 46,008 44,529 36,899 41,454 42,536 44,690 46,803 48,840 50,780 Projected Pro Forma Condensed Balance Sheet
  37. 37. 36 Table 14: Pro Forma Income Statement for DCF Analysis of Valuation with Improvements With Improvements (000's units) FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Revenue Africa (USD$ MM) 2,267.00 6,752.00 6,853.00 6,938.66 7,112.13 7,663.32 8,134.61 8,504.74 8,755.63 Asia (USD$ MM) 3,797.00 3,285.00 3,136.00 3,151.68 3,180.05 3,221.39 3,276.15 3,344.95 3,428.57 Latin America (USD$ MM) 7,821.00 7,812.00 7,812.00 7,890.12 8,028.20 8,228.90 8,496.34 8,836.19 9,255.91 Europe (USD$ MM) 4,292.00 4,319.00 4,186.00 4,165.07 4,154.66 4,154.66 4,165.04 4,185.87 4,217.26 North America (USD$ MM) 141.00 143.00 143.00 143.72 144.65 145.81 147.19 148.81 150.67 South Africa (USD$ MM) 4,895.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Corporate (USD$ MM) (5,828.00) (5,607.00) (5,596.00) (5,456.10) (5,346.98) (5,266.77) (5,214.11) (5,188.04) (5,188.04) Total Revenue (USD$ MM) 17,385.00 16,704.00 16,534.00 16,833.15 17,272.70 18,147.30 19,005.23 19,832.53 20,620.01 Cost of Sales(exc. Depre.) (USD$ MM) 11,534.00 10,984.00 10,844.00 10,545.13 10,792.98 11,327.71 11,835.44 12,306.45 12,734.29 EBITDA Africa (USD$ MM) 544.00 1,751.00 1,755.00 2,116.29 2,194.09 2,390.96 2,566.47 2,713.01 2,823.69 Asia (USD$ MM) 923.00 752.00 692.00 857.16 883.95 914.77 949.98 990.00 1,035.32 Latin America (USD$ MM) 2,449.00 2,520.00 2,526.00 2,533.86 2,626.37 2,741.41 2,881.48 3,049.76 3,250.16 Europe (USD$ MM) 878.00 818.00 784.00 898.19 920.87 945.80 973.16 1,003.14 1,035.97 North America (USD$ MM) 7.00 9.00 16.00 15.81 17.14 18.52 19.94 21.43 22.98 South Africa (USD$ MM) 1,224.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Corporate (USD$ MM) (174.00) (130.00) (83.00) (133.29) (162.71) (191.87) (221.24) (251.26) (282.39) Total EBITDA (USD$ MM) 5,851.00 5,720.00 5,690.00 6,288.02 6,479.72 6,819.58 7,169.79 7,526.07 7,885.72 Depreciation (USD$ MM) 1,458.00 1,281.00 1,231.00 1,388.88 1,390.61 1,416.00 1,440.77 1,464.96 1,489.07 EBIT Africa (USD$ MM) 439.00 1,478.00 1,471.00 1,734.67 1,820.71 2,007.79 2,180.08 2,330.30 2,451.58 Asia (USD$ MM) 462.00 468.00 438.00 598.82 623.29 650.72 681.44 715.82 754.29 Latin America (USD$ MM) 1,983.00 2,069.00 2,110.00 2,051.43 2,135.50 2,238.26 2,361.98 2,509.48 2,684.22 Europe (USD$ MM) 652.00 576.00 548.00 666.41 689.67 714.60 741.38 770.20 801.28 North America (USD$ MM) 7.00 9.00 14.00 11.50 12.44 13.41 14.42 15.48 16.57 South Africa (USD$ MM) 1,052.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Corporate (USD$ MM) (202.00) (161.00) (122.00) (163.68) (192.49) (221.20) (250.28) (280.15) (311.28) Total EBIT (USD$ MM) 4,393.00 4,439.00 4,459.00 4,899.14 5,089.12 5,403.58 5,729.02 6,061.12 6,396.65 Net Interest (USD$ MM) 822.00 736.00 629.00 560.40 664.73 611.51 598.25 575.71 542.05 Adjustments(+) (USD$ MM) 1,094.26 1,082.68 959.90 1,450.81 1,507.07 1,600.19 1,696.57 1,794.92 1,894.28 Income Before Tax (USD$ MM) 4,665.26 4,785.68 4,789.90 5,789.56 5,931.45 6,392.27 6,827.34 7,280.32 7,748.88 Tax (USD$ MM) 1,192.00 1,173.00 1,273.00 1,447.39 1,482.86 1,598.07 1,706.84 1,820.08 1,937.22 Net Income Before Minority (USD$ MM) 3,473.26 3,612.68 3,516.90 4,342.17 4,448.59 4,794.20 5,120.51 5,460.24 5,811.66 Minority 236.07 266.25 255.09 314.81 322.52 347.58 371.24 395.87 421.35 Net Income (USD$ MM) 3,237.19 3,346.43 3,261.80 4,027.36 4,126.07 4,446.62 4,749.27 5,064.37 5,390.31 Projected Pro Forma Income Statement
  38. 38. 37 Table 15 Summary of Valuation Valuation Approach Scenario EV Share Price Comparable Companies Analysis Base Case US$97.7bn US$50.20 With Control Premium US$122.1bn US$72.90 Precedent Transaction Analysis With Control Premium US$97.8bn US$50.90 DCF Analysis As-Is Valuation US$76.8bn US$38.90 With improvement US$86.5bn US$44.70 After synergy US$108.4bn US$57.80
  39. 39. 38 REFERENCE [1] Marija Mamolo, Sergei Scherbov “Population Projection for Forty-Four European Countiries: The Ongoing Population Ageing.” Appendix C Web. 1 Mar. 2016 <http://www.oeaw.ac.at/vid/download/edrp_2_09.pdf.> [2] United States Census Bureau. “2014 National Population Projection: table 3: Projections of the Population by Sex and SelectedAge Groups for the United States: 2015 to 2060”. Web 15 Mar. 2016 <http://www.census.gov/population/projections/data/national/2014/summarytables.html> [3] Goldman Sachs “Millenials, Coming of Age”. Web 15 Mar. 2016 <http://www.goldmansachs.com/our-thinking/pages/millennials/> [4] AB InBev "AB InBevAsian Pacific market analysis". Web 01 Mar. 2016 <http://www.abinbev.com/investors/presentations/_jcr_content/contentPar/accordioncomponent/accordioncomponen t/accordionsection_11/accordionsection_11/download_23/file.res/Barclays%20Capital%20Back-to School%20Consumer%20Conference,%20Boston,%20September%2010,%202015> [5] Bloomberg "Yanjing Brewery Said to Plan Stake Sale to Foreign Investor". Web 03 Mar. 2016 <http://www.bloomberg.com/news/articles/2015-02-09/yanjing-brewery-said-to-plan-20-stake-sale-to-foreign- partner-i5xi28zo> [6] IBISWorld “Global Beer Manufacturing: Market Research Report. Web 10 Mar. 2016 <http://www.ibisworld.com/industry/global/global-beer-manufacturing.html.> [7] SAB Miller Annual Report."Annual Report 2015." Web. 16 Mar. 2016. <http://www.sabmiller.com/investors/reports/annual-report> [8] Amcham Belgium"AB InBev Company Visit: Innovation Is Key."Web. 28 Mar. 2016. <http://www.amcham.be/blog/2015/02/ab-inbev-company-visit-innovation-key>.

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