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B. DETAILED REPORT

4. Detailed findings and recommendations

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1 Priority: Integration, Synergies and Execution Risk

This issue is a strategic threat and an opportunity in our SWOT analysis (Appendix 1) as market

sentiment has not been as favourable as we anticipated (share price only rose by 1.8% compared to
the 25% we envisaged). We may have overpaid, or, may fail to execute the integration and realise all
synergies within 4 years, threatening to destroy shareholder value. On the other hand, it is also a

strategic opportunity to consolidate our global leadership position! Let’s address the two key questions:

1. Is the deal fairly valued?
As shown in Appendix 3.4, SABMiller is currently valued at US$98,9 billion and they have accepted,
in principle, our offer to acquire them for US$105,5 billion –a 7% premium (US$6,6 billion). The post-

strategic tax cost and revenue synergies, taking into account the 4 annual cost payments towards
realizing the synergies and our cost of capital of 10%, is valued at US$ 8,1 billion (Appendix 2.3). In
theory, the maximum that AB InBev could pay for SABMiller will be its market value + the envisaged

synergies. In this case, US$107 (98.9 + 8.1) billions. It has however, managed to secure SABMiller’s
acceptance of US$105.5 billion, so it can be concluded that the deal is fairly valued (not overvalued).

2. Can we execute and deliver on the synergies?

As Appendix 3.4 also shows, 81% (6.6 / 8.1) of the synergies is being paid over to SABMiller’s
shareholders, whilst AB InBev is only retaining 19%. Should these synergies, 92% (2.450/2.660) of
which are cost synergies, notoriously easier to quantify, but hardest to deliver – not realise over the
next 4 years as envisaged, we could see a spectacular failure of this acquisition. This is where a sound

project integration and management strategy is needed, in order to maximize the chances of a
successful outcome. We have accordingly, applied Earned Value and feedforward control techniques
in Appendix 3.1 and 3.2 to assess our chances on this front:

Appendix 3.1 Project integration: We plan to spend US$290 million (BAC) in 4 equal instalments over
4 years. Presuming we initiated the integration by October 1, 2016 and accomplish 50% in 2 years,
we should have spent half that cost (US$145million) by 3 October 2018. However, our recent forecast
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shows only US$67 million would have been spent/earned (BCWP) at that midpoint, meanwhile the
projected costs (ACWP) show we would have spent US$231million. This means we will be almost
54% behind schedule (SV%) on the integration, that is just over 2 years past the 4 years plan (54% *
4 years) and would be overrunning on costs (CV) by 59% as of this mid-way point. Should the trends

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