Page 4 - AB INBEV 2018 Case Study 2

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4. THE REQUIREMENT

The Board had thankfully received your initial report as presented at the JSE. AB InBev has now completed
all negotiations, resolved all regulatory hurdles and tabled a final offer to the board of SABMiller which was
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accepted – and hence the deal has just closed. Today, it is 3 October, 2018: an emergency Board
meeting will take place in 3 hours. You now need to prioritise and evaluate the strategic developments,
including ethical issues affecting the group since your initial report -and provide strategic advice.

NOTE:

Unless otherwise updated by the new facts that now follow (including pertinent data provided in the
appendices), all facts previously availed about the case remain applicable. Please note that the five issues
to be resolved are in many ways as interconnected as they are separate. It is your duty therefore, to
independently define what the problem or key board decision dilemma is, and what knowledge
areas from your school work will be most applicable to help the board to reach the right strategic

decision!

4. FIVE (5) BOARD STRATEGIC DECISIONS (FOR YOUR ADVICE)
Deal Funding Strategy & Group Financial Performance

The final offer which SABMiller accepted was raised to respond to investor concerns about the deal’s
structure after the UK’s vote to exit the European Union prompted a slump in pounds sterling. SABMiller
shareholders have accepted to receive 45 pounds ($59) a share, up from 44 pounds per share when the
initial offer was first made (on 11 November, 2015). AB InBev also increased the amount of cash for
shareholders who choose a cash-and-stock alternative. They’ll now receive about 4.66 pounds in cash

compared with 3.78 pounds previously.

Following this final acceptance, AB InBev is consolidating SABMiller and will be reporting the results of the
retained SABMiller operations in its income statement as of the fourth quarter 2018. Taking into account
SABMiller’s 4 quarter results, the final accepted deal structure, the adopted deal funding strategy (being
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largely debt (loan) finance), the progressive realisation of some of the disposals the group had agreed with
regulatory and antitrust authorities, as well as other revenues and cost projections (including the related

synergies), the group has projected its results for the year ending December 2018 as well as for 2019 (See
Appendix 1(a) and 1(b)). Its 5-year strategy and financial objectives, set back in January 2014, are still
operative and up for review today, in time to decide on the key changes it should make, if any, when it plans
to announce (-in January 2019), its new 5-year strategy and financial targets. The CharterQuest
Professional Education Institute has compiled the following hypothetical data:

The CFO Case Study Competition 2018 (Grand Finale Pack)
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