Anheuser-Busch (A-B) had long been the world’s largest brewer but through a series of acquisitions, InBev managed to surpass A-B. On June 12, 2008, InBev made an unsolicited $65 per share bid for A-B that was subsequently accepted at $70 per share.
This case presents information that can be used to consider whether the offer was too high. Among the reasons why the price might be too high were large pension obligations, significant outstanding employee stock options, and a price-to-EBITDA ratio of more than 12, even before adjusting for pension and employee stock option obligations. The case includes results from a German academic study showing that brewer acquisitions at an EBITDA multiple above 10 were rarely successful.
Among the reasons why the price might be reasonable were that A-B had several investments InBev might be able to sell to help pay down the debt. They included the Bush Entertainment division (Busch Gardens and Sea World), plants that produced aluminum cans, and a 50% equity interest in Grupo Modelo, brewer of Corona beer. A-B also had a reputation of being run like a private company, with very attractive compensation and benefit packages for all employees. Executives enjoyed lavish offices and high salaries; workers enjoyed high wages; all employees received two cases of A-B products each year; the firm made generous charitable contributions throughout the U.S., and particularly generous contributions in the St. Louis area.
The general tone of the case is that InBev may have overpaid for A-B. However, the case includes a number of disclosures that provide additional information about A-B’s potential value.