CASE STUDY [100 Marks]

It's Final: AB InBev Closes On Deal to Buy SABMiller

Tara Nurin,Oct 10,2016

The long-anticipated more than $100 billion merger between Annheuser-Busch InBev (ABInBev) and Sab Miller closed early evening Monday leaving Coors Brewing Co. the last of the former Big Three beer companies to stand apart from the other two. (Coors is not independent, however as a result of the merger, Molson Coors took over SAB Millers American Coors holdings and already owns the company internationally). SABMiller ceased trading on global stock markets last week starting Tuesday the new company will trade as one under the name Newbelco.

After what the Financial Times says is the third largest acquisition in history and the largest ever in Britain -- where SABMiller remains headquartered until its main corporate functions merge with AB In Bevs in Belgium -- the new company will boast annual sales of $55 billion. Thats up from $44 billion before the closing. Because the merger combines the worlds two leading beer companies, shareholders had to agree with courts around the world to spin off many popular beer brands before proceeding. According to published reports, Japans Asahi has expressed interest in following up its purchase of Peroni, Grolsch and Meantime with the purchase of additional brands. Kirin, also from Japan, and Chinas China Resources Enterprises are also said to be among those eyeing the brands, which include the Czech Republics Pilsner Urquell. Though the merged company will divest itself of many brands in order to comply with anti-trust laws, the deal brings AB InBev a much larger presence in developing countries and continents like China, South America and Africa, where SABMiller enjoys much stronger holdings and access to markets.

Though observers never really questioned the ultimate outcome of the merger negotiations, they didnt always proceed smoothly. Recently, small SABMiller shareholders challenged the value of the cash theyd receive in exchange for their shares, causing AB InBev to raise its offer to reflect the fallen post-Brexit pound. It seems, however, that the small shareholders may have lost some of the value they thought theyd gained from their compromise with AB InBev according to Business Day, a slide in the value of the pound Friday brought the per share value down to pre-compromise levels. AB InBev will cut its global workforce by 3% post-merger, and advocates for independent breweries have also been watching the proceeding with concern. Not only do they fear the merger will flatten the market, they caution it can make AB InBev's anti-competitive distributor network even more powerful. And AB InBev just cant seem to stay out of trouble. In the latest of a string of disciplinary actions by the federal government, late last month the corporation agreed to pay $6 million to the Securities and Exchange Commission to settle bribery charges in India.

Answer ALL the questions in this section

Question 1 (20 Marks)

Give a critical account of Mergers and Acquisitions for corporations in the context of the above case study. You need to cite appropriate examples.

Question 2 (20 Marks)

Evaluate the Resource Based View (RBV) and apply it to an organization of your choice. Explain clearly how the resources helped achieve a competitive advantage for the company.