AB Inbev has been speculating to buyout SABMiller for the last few years, but this never materialized as AB Inbev was carrying a lot of debt taken to finance its other mergers and acquisitions in the last five years. As beer is expected to grow at a fast pace in South American and African markets, Anheuser sees an immense opportunity in these markets. Moreover, Anheuser has witnessed steady increase in cash flows and large input cost reductions, giving the firm enough sound reasons to go ahead with the deal.
AB Inbev is currently valued at $182 billion, double the market capitalization of SABMiller. AB Inbev is approaching banks for this $122 billion deal to acquire SABMiller. The possible acquisition will give Anheuser control over one-third …show more content…
The acquisition will boost AB InBev's margins as well. AB InBev can cut down on costs by eliminating redundant manufacturing and other input costs and exploit synergy benefits from this deal. Anheuser is looking forward to benefit from a strong integrated model (AB InBev, Grupo Modelo and SABMiller together) and economies of scale. Anheuser is aiming at cost synergies of $1 billion by the end of 2016, and the acquisition gives it an opportunity to do so. Even though SABMiller's operating margins (19%) were low as compared to that of AB InBev (33%) in the last fiscal year, the deal sees some significant benefits by removal of redundant costs and manufacturing complexity and leveraging high fixed cost base in Latin America.
Risk mitigation by diversifying into other markets - SABMiller has lot of assets in the emerging markets and in particular, it has lot of assets in markets where AB InBev is not a major player. Acquisition of SABMiller would give AB InBev more than $7 billion of revenue in Africa and almost $4 billion of sales in Asia. This will reduce the dependency of AB InBev on America and Brazil. This will provide risk mitigation to the operations of AB
AB Inbev is currently valued at $182 billion, double the market capitalization of SABMiller. AB Inbev is approaching banks for this $122 billion deal to acquire SABMiller. The possible acquisition will give Anheuser control over one-third …show more content…
The acquisition will boost AB InBev's margins as well. AB InBev can cut down on costs by eliminating redundant manufacturing and other input costs and exploit synergy benefits from this deal. Anheuser is looking forward to benefit from a strong integrated model (AB InBev, Grupo Modelo and SABMiller together) and economies of scale. Anheuser is aiming at cost synergies of $1 billion by the end of 2016, and the acquisition gives it an opportunity to do so. Even though SABMiller's operating margins (19%) were low as compared to that of AB InBev (33%) in the last fiscal year, the deal sees some significant benefits by removal of redundant costs and manufacturing complexity and leveraging high fixed cost base in Latin America.
Risk mitigation by diversifying into other markets - SABMiller has lot of assets in the emerging markets and in particular, it has lot of assets in markets where AB InBev is not a major player. Acquisition of SABMiller would give AB InBev more than $7 billion of revenue in Africa and almost $4 billion of sales in Asia. This will reduce the dependency of AB InBev on America and Brazil. This will provide risk mitigation to the operations of AB