Merger Between Brahma and Antarctica
Case Study - Brazilian Beer Merger Negotiations
Xichao Hu, Shiqiang Yang, Rui Zhong, Chenzheng Wang
1. SWOT analysis Brahma | Antarctica | Strengths:The largest producer; Improved productivity; strategic with foreign producers; Two independent distribution Weaknesses:Low volume of sales of nonbeer products; Antitrust restrictionOpportunities:Positive volume growth of beer sales; New and attractive market Threats:Rising foreign firms’ competition; Tariffs elimination; Rising imported ingredients cost | Strengths:Brazil’s second-largest brewer and its largest soft-drink producer; World- famous brand; Expansion of production capacity(in the long term)Weaknesses:Sales decline; lack of a customer focus; regional distribution; Expansion of production capacity(in the short term); low efficiency; high levered Opportunities:Positive volume growth of beer sales; New and attractive market Threats: Rising foreign firms’ competition; Tariffs elimination; Rising imported ingredients cost |
Since Antarctica was high levered and decline in sales, a merger would make sense. The value will generate from cost savings and enlarged market shares.
2. No. MOE is the combination of two firms of about the same size to form a single company. In a merger of equals, shareholders from both firms surrender their shares and receive securities issued by the new company. Brahma and Antarctica didn’t have the similar market size; Brahma apparently had a higher market value. In this case, Brahma would use some of its stock shares to exchange Antarctica’s but no the new company’s shares will be issued.
3. In our estimation, the stand-alone value of Antarctic is R$49.04 per share. The value of synergies is R$53.55 per share. The maximum price per share I would pay for Antarctica is R$102.59 per share. See the calculation in Appendix a.
4. The stand-alone value of Brahma is R$841.67 per share. This valuation is bigger than market price. That might because of the fact that the Brazilian
Xichao Hu, Shiqiang Yang, Rui Zhong, Chenzheng Wang
1. SWOT analysis Brahma | Antarctica | Strengths:The largest producer; Improved productivity; strategic with foreign producers; Two independent distribution Weaknesses:Low volume of sales of nonbeer products; Antitrust restrictionOpportunities:Positive volume growth of beer sales; New and attractive market Threats:Rising foreign firms’ competition; Tariffs elimination; Rising imported ingredients cost | Strengths:Brazil’s second-largest brewer and its largest soft-drink producer; World- famous brand; Expansion of production capacity(in the long term)Weaknesses:Sales decline; lack of a customer focus; regional distribution; Expansion of production capacity(in the short term); low efficiency; high levered Opportunities:Positive volume growth of beer sales; New and attractive market Threats: Rising foreign firms’ competition; Tariffs elimination; Rising imported ingredients cost |
Since Antarctica was high levered and decline in sales, a merger would make sense. The value will generate from cost savings and enlarged market shares.
2. No. MOE is the combination of two firms of about the same size to form a single company. In a merger of equals, shareholders from both firms surrender their shares and receive securities issued by the new company. Brahma and Antarctica didn’t have the similar market size; Brahma apparently had a higher market value. In this case, Brahma would use some of its stock shares to exchange Antarctica’s but no the new company’s shares will be issued.
3. In our estimation, the stand-alone value of Antarctic is R$49.04 per share. The value of synergies is R$53.55 per share. The maximum price per share I would pay for Antarctica is R$102.59 per share. See the calculation in Appendix a.
4. The stand-alone value of Brahma is R$841.67 per share. This valuation is bigger than market price. That might because of the fact that the Brazilian