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Conduct in-depth background research to enhance the analysis
Course:- Other Subject
Reference No.:- EM13882512




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Coursework Brief and Case Study

Read the news announcement ‘SABMiller and AB InBev agreement in principle and extension of PUSU deadline' from SABMiller website to perform the following tasks of analysis and write up your finding in a report format.

You are encouraged to conduct research on the effects of the news on share price. All related regulatory announcements can be found (as of Wednesday 14 October 2015) at the following website: https://www.sabmiller.com/investors/ABInBev-Possible-Offer

This is an ongoing case of M&A, one of the biggest in the UK. The study should emphasize the state of the play, valuation and trading strategy going forward. The students are encouraged to take a forward looking view on the future of acquisition event.

• Conduct in-depth background research to enhance the analysis of the acquisition event. Such research should demonstrate in-depth understanding on the working of the sector. You should set up a timeline to reflect the chronicle of events based on key dates.

• Conduct comprehensive valuation on SABMiller and AB InBev prior to the acquisition announcement. Your valuation should use relevant valuation technique(s) to arrive at an appropriately discounted present value (per share) for SABMiller and AB InBev.

• Evaluate the extent of price impacts on SABMiller and AB InBev following the news announcements on acquisition. Does the movement of share price reflect the insights from Efficient Market Hypothesis (EMH)?

• Conduct event analysis to test EMH and derive your trading profit from the event. An event analysis template is provided separately based on Chapter 14 contents of Simon Benninga textbook ‘Financial Modelling (4th edition)'.

• You are required to demonstrate trading strategies and instruments that would be appropriate to exploit price efficiency/inefficiency during the process of acquisition. Your analysis should forecast possible trading profit going forward.

Key Learning Outcomes

• Demonstrate knowledge of the purpose and functions of global financial markets

• Analyse the role of financial market data in supporting business decisions

• Critically evaluate the impact of the global financial markets on the business environment

• Demonstrate the ability to analyse and present quantitative data to support an argument.

• Use information technology to analyse and communicate financial data

• Reflect on your own ability to interpret and act upon the changing business environment.

Attachment:- event studies template.rar

Answered:-

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Both AB InBev and SABMiller belong to the Beverage and Brewing Industry in which the former, being headquartered at Belgium, is the world’s largest brewer and has a 25% global market share whereas the latter, being headquartered at London, England, is the world’s Second largest brewer measured by revenue. Thus acquiring SABMiller would not only cut out its major competition but would also give AB InBev more than 30% of Global Market Share.

AB InBev consists of a portfolio of more than 200 brands which include the likes of Budweiser, Corona and Stella Artois, international brands Becks’s, and local brands such as Bud Light, Skol, etc. while SABMiller’s flagship include Foster’s, Pilsner Urquell, Miller Genuine Draft, and also over 150 market-leading local brands. SABMiller is also world’s largest Coca-Cola bottlers and has also carbonated soft drinks bottling operations in 14 markets. Thus in a way if AB InBev acquires SABMiller, then it would control all the top major brands in Beer market and would enter the soft drink industry.

AB InBev has a primary listing in Euronext Brussels and is a constituent of Euro Stoxx 50 index. It has a secondary listing on New York Stock Exchange. On the other hand SABMiller has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It has a market capitalization of approximately 42 Billion Euros as of 24th October 2015, the 6th Largest of any company with a primary listing on the London Stock Exchange. It has a secondary listing on the Johannesburg Stock Exchange.

SabMiller being a company that is engaged in brewing beer and soft drinks business which helps in improving the livelihood of the business, it generally trades on the London Stock Exchange with a Secondary Listing Agreement. It employs around a major number of people around the world and more than at least 1,40,000 bottles are sold everyday every time with the generation of revenue of around US $26,288 million and an EBITA of US$6,367 million.




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