The following discussion describes a takeover attempt in the beer industry in 20
ID: 1251601 • Letter: T
Question
The following discussion describes a takeover attempt in the beer industry in 2008.(David Kesmodel and Matthew Karnitschnig, "InBev Uncorks Anheuser Takeover
Bid," Wall Street Journal, June 12, 2008.)
“In June 2008, InBev NV, a Belgian-Brazilian giant, launched an unsolicited bid
to acquire Anheuser- Busch Cos. for $46.4 billion, a move that would create the
world's largest brewer with annual sales of approximately $36 billion. InBev, the
maker of Stella Artois and Labatt Blue, has long considered acquiring AnheuserBusch, which controls nearly half the U.S. beer market The two companies
market about 300 brands on six continents and are the second- and third-largest
brewers in the world in terms of volume.
Anheuser has struggled with slow growth of its mass-market beers in recent
years. U.S. sales have suffered from greater competition from a wide range of
beers, including small-batch "craft" beers and imports, as well as from wine and
spirits. There is increasing consolidation in the global beer industry as brewers
try to balance slow growth in mature markets, such as the United States and
Western Europe, with rapid growth in emerging markets such as China and
Eastern Europe. There are also increasing expenses for commodities, such as
barley, aluminum, and glass, making it important to gain economies of scale.
InBev has only a tiny presence in the United States and would like to acquire
Anheuser, which has led the U.S. industry since 1957. InBev, which is intensely
budget-conscious, sees an opportunity to wring significant cost-savings out of
Anheuser. The two companies have relatively little geographic overlap. By
merging, they could gain a stronger position in China, where they both have
been expanding recently. China is the world's largest beer market by volume.
InBev has secured commitments from banks to provide at least $40 billion in debt
financing for the merger. Its success in raising the financial capital is an
indication that banks are willing to lend substantial sums to companies with
investment-grade credit ratings despite the continued turmoil in the financial
markets and the efforts of a number of institutions to raise capital.
InBev also has the U.S. public to consider because many U.S. citizens believe
that Budweiser remains a powerful symbol of Americana A Florida couple
recently started a Web site called SaveBudweiser.com to rally support against a
sale to InBev.”
Discuss the factors leading to this proposed takeover merger in the beer industry.
What factors are key for the success of the merger? What factors might create
problems for the merger?
Explanation / Answer
In US Anheuser has facing immense competition from small batch craft beers and imports. And also due to increased cost of inputs like barley, aluminum, and glass, makes it strategically important to gain economies of scale.
And InBev a Belgian-Brazilian giant which is considered as a more cost and budget conscious company, was trying to capture US market seen a significant cost effective opportunity in acquiring Anheuser. And both the companies have a very little overlap of their geographic presence.
Thus by merging they become one of the top beer company in the world with a presence in almost in 5 continents.
A merger always gives the benefit of increasing the value of the merged company higher than when the individual companies’ values were considered.
The key factor for the success of the merger is that both the companies are number 2 and 3 in market share, they are well experienced and have a very little overlap of the their geographical presence. And after the merger they are literally present all over the world which can use the resources optimally at different parts of the world leading to economies of scale. And both the companies have more than 300 products in distribution giving it economies of scope.
Factors that can create problems to the merger:
US regulations and Anti trust law can be one of the factor. And the patronage and sentiments of the American Budweiser consumer can switch to another local made brand which results in loss of market share in US.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.