Big Beer: Inbev vs. Anheuser-Busch Case Study Help

Big Beer: Inbev vs. Anheuser-Busch Case Solution

The value of the Anheuser-Busch (AB) is $23.3 billion. However, if the offering price of the Inbev is less than the calculated value of AB, then the company had undervalued the AB with a low bid price. Similarly, if the company has offered the price more than the calculated price that means thecompany had overvalued the company. Whereas, the EBITDA multiple of the company is 11.37x. Against which the EBITDA multiple of the Inbev acquirer’s is 8.35x. Meanwhile, the AC company has the second highest EBITDA in the industry against the other brew companies operating worldwide.

AB is the third largest market player in the US. Similarly, thecompany has potential to grow in the market in the industry in different categories; it is also operating in China and UK. Meanwhile, it has the 5.2% worldwide sales volume to these countries which is equal to 57 million barrels. Consequently, company’s net income from the international sales increased by 13.4% in 2007. On the other hand, thecompany had also acquired Grupo Modelo (GM) Mexico’s leading brewer with 56% market share. With similar strategy company also acquired brewing businesses in China to increase the market share

Meanwhile, AB’s packaging operations ha significant cost efficiencies, cost saving and quality assurance which contributed $1.8 billion revenues. However, thecompany has been aggressively working against to cut the cost through the vertical integration and by the program Blue ocean that effectively reduces the operating expenses, labor productivity, supply chain and energy use. However, it is estimated that the program would deliver $400 to $500 million in cost savings.

Indeed, industry experts have given anopinion that company would be able to save cost over $1 billion by 2010. However, AB’s relationship with the wholesalers is unique. Because two third of the wholesalers in the United States has AB-sanctioned products in the market.

 

Exhibits

Table 1 Discounted Cash-flow

Anheuser-Busch (AB)          
($ in millions)
          CAGR
2003 2004 2005 2006 2007 2003-2007
Revenue $14,147.0 $14,934.0 $15,036.0 $15,717.0 $16,686.0 4.2%
% Growth 5.6% 0.7% 4.5% 6.2%
EBITDA 4,077.0 4,294.0 3,705.0 3,708.0 3,864.0 (1.3%)
% Margin 28.8% 28.8% 24.6% 23.6% 23.2%
Less:  Depreciation (877.0) (933.0) (979.0) (989.0) (996.0)
EBITA 3,200.0 3,361.0 2,726.0 2,719.0 2,868.0 (2.7%)
Interest Expense 402.0 427.0 455.0 451.0 484.0
Tax Rate 39% 39% 39% 39% 39%
Net Income $2,060.1 $2,202.4 $1,890.0 $1,979.2 $2,123.3 0.8%
Plus:  Depreciation 877.0 933.0 979.0 989.0 996.0
Less:  Capital Expenditures (348.0) (195.0) (126.0) (82.0)
Less:  Change in Working Capital (227.0) (151.0) (224.0) (417.0) (279.0)
Free Cash Flow $2,362.1 $2,789.4 $2,519.0 $2,469.2 $2,840.3 4.7%
DCF $ 2,053.97 $ 2,109.21  $1,656.31  $1,411.77  $1,412.13

 

Table 2 DCF Analysis by EBITDA Multiple Method

DCF Analysis (2003-2007):  EBITDA Multiple Method
Enterprise value  $43,940.00
EBITDA 3,864.0
EBITDA Multiple          11.37
Value of Firm Through EBITDA Multiple
EBITDA       11.37 Value of Firm  $     23,289
WACC 15.0%

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Posted on June 6, 2017 in Case Solutions

Big Beer: Inbev vs. Anheuser-Busch Case Solution

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