Financial Viability of AB InBev's Acquisition of SABMiller: Analysis

This report provides a comprehensive analysis of AB InBev's acquisition of SABMiller, examining the deal's background, motivations, and financial aspects. It explores the reasons behind the acquisition, the arrangement of funds, and the expected benefits for stakeholders, including shareholders. The report delves into the financial performance of the combined entity, highlighting revenue growth and market share gains post-acquisition. It also discusses the reduction in tax bills, opportunities for growth, and the potential for significant returns for stakeholders. The analysis includes financial illustrations and concludes that the acquisition had a positive impact on AB InBev's growth. The report provides insights into the complexities of international finance and the strategic considerations involved in mergers and acquisitions within the brewing industry.

International Finance and
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
.........................................................................................................................................................7

INTRODUCTION
International finance and accounting has huge importance in respect to the analysis of
any aspect related to the organisation for the determination of actual results. This includes the
use and application of some common phenomenons of finance and accounting which are same in
all over the world. The importance of this ascertained from the fact that provides an opportunity
to compare organisations at global level. AB InBev is one of the largest brewer and multinational
drink organisation based in Leuven, Belgium. This organisation has their global functional
management office in New York City. It provides their products and services in all over the
world. The major expansion was seen in this organisation operations in 2016. It was the year
when this organisation acquire SABMiller. This contributes in the building of first truly global
brewer. The aim of this report is about analysis of this overall deal for the purpose of
ascertainment its viability for an organisation and associated stakeholders (Altman And et. al.,
2017).
The aspects which are covered in this report includes explanation of overall deal, reason
behind its occurrence, arrangement of funds and the expected benefits that can be ascertained by
the stakeholders of an organisation due to the performance of this deal.
MAIN BODY
AB InBev Is the multinational drink and brewing company. Its main operations are
based on Leuven, Belgium. It provides its provides and services in all of the world. The main
function office of this organisation is situation in New York City. There are many other regional
headquarters of this organisation in different city such as London, Mexico, Bremen,
Johannesburg etc. These also have significant contribution in regular operation of an
organisation around the whole world. This organisation was founded in 2008, 11 years ago. The
different products in which this organisation deals includes Alcoholic Beverages, Beer, Spirits
and Soft Drinks. The number of employees associated with this organisation and work towards
the accomplishment of organisational objectives are around 183000. Through the consideration
of the financial statements of an organisation ascertained that this organisation was doing good
and have decent market share before 2016. The major change was ascertained in year 2016 when
this organisation acquire its competitor organisation named SABMiller. The integration of both
organisation help to build in creation of first truly global brewer and largest fast moving
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consumer goods organisation in the world. After this, assumed that integrated operations have
the ability to grab more 28 percent market share in drinking and brewing industry. The increase
in sales was noticed in year 2018. The mark attained the figure of US$54.6billion. This depicts
that the assumption in year 2017 was true in nature as the ability of an organisation increased due
to which able to improves sales figure along with market share (Brusca And et. al., 2016).
In 2016, the overall deal was about the acquisition of SABMiller by AB InBev. It is also
known as takeover of the operations of an other organisation to hold control and run its business
activities to earn profits and accomplishment of future objectives. This deal includes the
involvement of more than $100billion which was paid by AB InBev to SABMiller against to the
acquisition of their shares and control. The main reason behind this deal was about creation of
giant position in brewer industry for the purpose of attaining control over the world's top most
brands such as Budweiser, Corona, Leffe and Stella Artois. Also, had the aim about
ascertainment of 27 percent of beer sales worldwide along with the annual revenue of around
$55billion. They had the aim about the expansion of their business by sustaining the name of
world's larger brewer organisation. The slogan followed was committed towards attainment of
long term growth and creation of value for all associated staeholders. This acquisition had the
power regarding improvement of the position of AB InBev in Africa where they have less
operations along with formulation of greater dominance in Latin America (Information related to
takeover by AB InBev. 2020).
The deal of acquisition was approved by the shareholders irrespective of the objections
from some of the SABMillers investors. To made this deal AB InBev is required to attain the
approval of majority shareholders and by at least 75% in share value. The total number of
support attained by AB InBev from the shareholders was 95.5 percent. Another major aspect
which was generally needed to succeed in process of takeover is availability of sufficient amount
of the funds (Henderson And et. al., 2015). It was the duty of the management to prove against
the shareholders and appropriate authorities that organisation has sufficient amount of funds and
have ability to pay off the accepted offer within the stipulated period of time. In the case of
acquisition of SABMiller, AB InBev was also required to show that they have sufficient amount
of funds to purchase the shares and pay off to the share holders. The deal is around US$
100billion which was arranged by AB InBev from the different banks as debt. The debt package
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is taken by the organisation from the different 21 banks which was amounted around
US$70billion.
There are many aspects which are arose in the process of this deal. These are important in
nature and required to monitor on continuous basis for the purpose of completing takeover and
acquisition process smoothly without any consequences. The two main shareholders of
SABMiller are Altria Group and Santo Domingo family. They hold around 40% shares of the
organisation. The support of these had already by AB InBev that contributes as the major success
aspect to formulate this deal. Takeover offer provided by AB InBev was initially criticised due to
the steep fall in the sterling. The fall was ascertained due to the reason of Britain's vote to leave
European Union (Hoyle, Schaefer and Doupnik, 2015). This would resultant into the creation of
less appealing offer of AB InBev against the purchase of the shares of SABMiller. The
shareholders of SABMiller demanded to increase the amount and provide high offer. But the
same was not succeed due to the support of the major shareholders of the organisation along with
Aberdeen Asset management. After the acquisition, new and integrated organisation was build
whose shares were start trading on Oct 11 in Brussels over the secondary listings of
Johannesburg and Mexico city along with American Depository shares in New York (Kim and
Zhang, 2016).
There are large number of benefits were associated with the performance and completion
of this deal. The ultimate positive returns was grabbed by the different number of shareholders
that were adjoin with the operations of an organisation or have some interest within the
functioning. The large number of expected benefits that can be attained by shareholders in future
due to the process of acquisition and adjoining with the operating functions of takeover
organisation were defined below in elaborative form along with proper justification (Information
about SABMiller Takeover by AB InBev. 2020).
Reduction in tax Bill: This was first and foremost benefit that can be ascertain by the
shareholders while having the shares within the organisation. If the structuring was done
properly then able to avoid paying taxes on the amount of equity which was roll back into the
organisation. The taxes were not going to be paid until the event of future liquidity was not
arose. So, the rolling of equity back in the organisation is the effective and attractive way that
provides an opportunity in reduction of tax bill post transaction (Nobes, 2014). After the
acquisition of SABMiller, same benefits were ascertained by the shareholders of that
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organisation through acceptance of equity share of AB InBev as they getting rid off the payment
of taxes. This is so because the situation of liquidity was going to arose in future.
Becoming the part of growing business: Holding the equity shares provides an
opportunity regarding the holding of ownership within the organisation in proportion to the
number of shares. The benefit of the same is ascertained in more effective way when hold the
shares within the organisation that have good successful future opportunities. After the
acquisition of SABMiller by AB InBev, growth opportunities are more in brewer industry as
they become the largest consumers good organisation. This will provides an opportunity to hold
all the opportunities present in market against to their competitors due to presence of better
resource and power in market. So, the holding of shares within such organisation was more
beneficial for the shareholders for the purpose of ascertaining maximum returns in future
(Oulasvirta, 2014).
Ability to get more significant returns: It was assumed that organisation is ready to sell
the business then it must be against to the organisation which was bigger in nature and having
the ability to run business properly. This would resultant into the attainment of bigger and
significant purchase price for the business. This provides an opportunity to an organisation
regarding yielding of larger returns as expected from the current business operations. This was
the situation when the shareholders were able to get the significant amount of returns which was
more than the expected (Ricky, GRIFFIN and MIKE, 2019). Same in the case of acquisition of
SABMiller by AB InBev, the value of around US$100 million was offered to the shareholders.
The amount was huge in nature that had utmost contribution behind the increment of return
against the shareholders of SABMiller (Yu and Wahid 2014.).
Opportunity to get aligned with new private equity buyer: The amount of return
would be high at the time of selling the shares in takeover procedures but further maximum
returns were gained by the shareholders if they roll equity within the new organisation. This
provides an opportunity to work with the new organisation that had synergic affect over its
performance and able to carry forwards the business in positive direction. So, continuing with
their own part had attached with the opportunity to earn higher amount of returns (Shenkar, Luo
and Chi, 2014). The same was applicable in the current study of benefits towards the
stakeholders due to takeover of SABMiller by AB InBev. This provides an opportunity to the
shareholders of SABMiller to associate with the operations of AB InBev and get higher amount
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of returns in future. This would be possible because the takeover of business allowed to ascertain
the benefit of synergy affect where integrated operations and functioning of an organisation help
to grab predetermined results within stipulated period of time (Warren Moffitt and Byrnes,
2015).
In overall nature ascertained from the above analysis that this acquisition was positive in
nature and had some significant contributions in the growth of AB InBev. For further analysis,
company accounts are analysed to support the acquisition. The detailed description along with
their interpretation is provided below that somehow depicts the positive contribution of
acquisition.
It is interpreted from the above depicted financial performance of the organisation that
after the acquisition of SABMiller in 2016 the revenue of an organisation increased in all the
four quarter of 2018. This shows that the synergic effect was worked and had positive impact
over the growth of an organisation due to the effective usage and application of available
resources towards the accomplishment of the organisational objectives and providence of
maximum return to shareholders (Annual report of AB InBev. 2018).
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Illustration 1: Financial performance, 2018

It is interpreted from the above image that the positive growth was attained by
organisation in year 2018. 4.8 per cent growth was ascertained in year 2018. This clearly depicts
that acquisition in 2016 has positive impact over the performance and growth of an organisation
that resultants into increment of their revenue and profit margin (Annual report of AB InBev.
2018).
CONCLUSION
It has been concluded from the above report that the process of acquisition of SABMiller
by AB InBev had goes through the many aspects but it would be successful due to the support of
major shareholders. The total amount which was offered by AB InBev around US$100billion.
The main issue arose in the offering was related to the reduction in value of Sterling due to
Britain's vote regarding separation from European Union. This resultants into building the offer
of AB InBev less appealing. The same was approved due to the support of major shareholders
hold around 40% of shares named as Altria Group and Santo Domingo family along. The main
reason noticed behind the occurrence of this acquisition was attainment of the big position in
brewer industry where all the big brands were in under control. Also, the aim about increment in
sales and profit through improve the business operations in Africa. This is so because SABMiller
had the major operations in the market of Africa that ultimately returns as the increment in
market share by 27% along with attainment of sales figure of US$54.6billion. The benefit of this
acquisition was not only ascertained by an organisation but the large number of opportunities are
present in front of shareholders through selection of the most suitable option. The four different
options are present in front of the shareholders that can further aid in attainment of the maximum
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Illustration 2: Revenue Growth, 2018

returns and benefits i.e. avoidance of taxes, rolling of equity and gather higher return, part of
growing business etc.
According to me, the overall deal of acquiring SABMiler by AB InBev is totally worthy
in nature as the large number of benefits are ascertained after 2016 i.e. higher amount of sales,
increased revenue in 2018 and capturing of the substantial area of Africa that resultants into
increment of market share by 27 percent. The same is adjudged from the financial statements and
performance of organisation after 2016. So, the decision of acquiring is quite good and
appropriate in nature from the side of AB InBev.
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REFERENCES
Books and Journals
Altman, E. I. And et. al., 2017. Financial distress prediction in an international context: A review
and empirical analysis of Altman's Z‐score model. Journal of International Financial
Management & Accounting. 28(2). pp.131-171.
Brusca, I. And et. al., 2016. Public sector accounting and auditing in Europe: The challenge of
harmonization. Springer.
Henderson, S. And et. al., 2015. Issues in financial accounting. Pearson Higher Education AU.
Hoyle, J. B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Kim, J. B. and Zhang, L., 2016. Accounting conservatism and stock price crash risk: Firm‐level
evidence. Contemporary Accounting Research. 33(1). pp.412-441.
Nobes, C., 2014. International classification of financial reporting. Routledge.
Oulasvirta, L., 2014. The reluctance of a developed country to choose International Public Sector
Accounting Standards of the IFAC. A critical case study. Critical Perspectives on
Accounting. 25(3). pp.272-285.
Ricky, W., GRIFFIN, P. and MIKE, W., 2019. International business: A managerial perspective.
Pearson.
Shenkar, O., Luo, Y. and Chi, T., 2014. International business. Routledge.
Warren Jr, J. D., Moffitt, K. C. and Byrnes, P., 2015. How Big Data will change accounting.
Accounting Horizons. 29(2). pp.397-407.
Weygandt, J. J., Kimmel, P. D. and Kieso, D. E., 2019. Financial accounting. Wiley.
Yu, G. and Wahid, A. S., 2014. Accounting standards and international portfolio holdings. The
Accounting Review. 89(5). pp.1895-1930.
Online
Annual report of AB InBev. 2018 [Online]. Available Through:
<file:///home/user/Downloads/190321_AB%20InBev%20RA2018%20EN.pdf>
Information about SABMiller Takeover by AB InBev. 2020 [Online]. Available Through:
<https://www.reuters.com/article/us-sabmiller-m-a-a-b-i/sabmiller-investors-cheer-100-
billion-plus-ab-inbev-takeover-idUSKCN11Y0QY>
Information related to takeover by AB InBev. 2020 [Online]. Available Through:
<https://www.nytimes.com/2016/09/29/business/dealbook/sabmiller-anheuser-busch-
inbev-beer-merger.html>
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