InBev Acquires AnheuserBusch

An Analysis of the deal

Bill Hoeker Amanda Frier Evelyn Mortenson Darcy Ward

Table of Contents
Introduction..................................................................................................... 3 InBev................................................................................................................ 3 InBevs Overview & History............................................................................3 InBevs Strategy............................................................................................4 InBevs Joint Ventures & Acquisitions.............................................................4 Geographical Breakdown for InBev................................................................5 InBevs Brands...............................................................................................6 Anheuser-Busch Companies, Inc.......................................................................6 Overview.......................................................................................................... 6 Financial Highlights......................................................................................10 Strengths and Weaknesses..........................................................................11 Marketing Channels.....................................................................................12 Competitive Landscape...................................................................................12 Market Update................................................................................................25 Why Do the Deal?...........................................................................................26 Synergies........................................................................................................30 Integration Plan..............................................................................................31 Communication Plan.......................................................................................32 Cultural Issues................................................................................................34 Regulatory Issues...........................................................................................35 Why would the Busch family sell now?............................................................37 Financial Valuation (DCF and Multiple Models)................................................38 Synergies........................................................................................................39 Combined Firm Financials...............................................................................40 Deal Structure................................................................................................40 Conclusion...................................................................................................... 41

Introduction
Our group is analyzing the acquisition of the Anheuser-Busch Company by InBev. We believe InBev will acquire the Anheuser-Busch Company to maintain the top position in the beer industry and to increase the companys market share in specific geographic markets. These companies would want to take advantage of the fast moving consolidation in the industry. This move reinforces InBevs strategy focusing on becoming The Biggest to the Best.

InBev
InBevs Overview & History Inbev was formed in 2004 when Interbrew acquired Brazils Companhia de Bebidas das Americas (Ambev). This created the worlds largest brewer by volume which controlled 14% of the global beer market. The companys origins date all the way back to 1366 when the Artois brewery was founded. Before the merger with Ambev, Interbrew was the third largest brewing company in the world by volume. Inbev is still the worlds leading brewer and is headquartered in Leuven, Belgium. It sells a portfolio of 200 premium and specialty beers and lagers in over 130 countries.1 The company has diversified portfolio including Becks, Brahma, Leffe, Skol, Cass, and Stella Artois. InBevs core business is beer, but it also has a presence in the soft drink market in Latin America. InBev employs about 89,000 people worldwide and operates facilities in more than 30 countries. InBev is listed on the EuroNext Exchange and the New York Stock Exchange. 2007 is the third full year of the integrated InBev. InBev had revenue of 14.4 billion euro resulting in 3,048 million in profit in 2007. By volume, Inbev sold 271 million hectoliters. EBITDA grew by 16.5% with an EBITDA margin of 34.6% in 2007. At year end 2007, InBev had a market capitalization of 35,057 million.2 Over the past three years, InBevs EBITDA margin has increase from 26.1% in 2004 to the 34.6% in 2007.

InBevs Strategy InBevs strategy is to focus on cost management and connect to consumers through innovation initiatives. InBev works to increase their margins and have a disciplined use of capital to increase shareholder value. The company implemented effective productivity programs to enable the company to offset rising costs and inflation. InBev focuses on a range of initiatives including the Voyager Plant Optimization program, which is bringing about a real step-change in brewery performance. It also entails raising the status of the procurement processes to maximize purchasing power, helping it gain the best results when Inbev is purchasing a whole range of goods and services including media, and IT. InBev is also optimizing its network of breweries and sharing best practices, all of which will lead to a more integrated business. Zero-Based Budgeting is a crucial element of world class efficiency, and one of the tools which helps InBev prioritize and control costs.1 It has now been introduced in all zones. The concept is simple; implementing it is much more difficult, but for InBev employees, Zero-Based Budgeting has become a way of life. InBev generates revenues through two business divisions: beer (92.5% of the total revenues during fiscal year 2006) and non-beer (7.5%).3 InBevs strategic approach is to build their brands and focus on sales execution. InBevs Annual Report lists three long term objectives: deliver volume growth ahead of industry growth; to grow revenue ahead of volumes; and ensure that cost remain below inflation.

InBevs Joint Ventures & Acquisitions Throughout InBevs history, the company has been involved in several acquisitions, alliances and joint ventures. InBev formed an alliance with PepsiAmericas in 2005 to introduce Becks in Poland. InBev acquired Russian based Tinkoff Breweries and Chinese based KK Brewery in 2005. The company increased its shares in Quinsa Industrial, the largest brewer in Argentina, Bolivia, Paraguay, and Uruguay. In 2006, InBev acquired full ownership of Interbrew Efes Brewery in Romania. Fujian Sedrin Brewery in China became part of the company in June 2006. In November 2006, InBev and Anheuser-Busch signed agreement to import InBevs premium brand to the US.1 InBev uses these joint ventures and acquisitions to help leverage their brands and expand their geographical reach.
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Geographical Breakdown for InBev

2007 Volumes

13.4%

1.9%

4.6% North America

18.2%

37.3%

Latin America North Latin America South Western Europe Central & Eastern Europe Asia Pacific Global Export & Holding Companies

13.3%

11.3%

Volume by Geography (in Thousand Hectoliters) 2007 North America Latin America North Latin America South Western Europe Central & Eastern Europe Asia Pacific Global Export & Holding Companies Total Revenue by Geography (in Million Euro) 2007 North America Latin America North Latin America South Western Europe Central & Eastern Europe Asia Pacific Global Export & Holding Companies Total

Year 2006 14,342 94,586 22,566 39,147 43,201 30,924 1,763 13,308

% of Total Volume 2007 2006 4.6% 37.3% 11.3% 13.3% 18.2% 13.4% 1.9% 5.3% 35.0% 8.3% 14.5% 16.0% 11.4% 0.7%

12,572 100,877 30,524 36,068 49,137 36,380 5,054 270,612

Year 2006 1,831 4,268 733 3,646 1,820 912 99 13,308

% of Total Revenue 2007 2006 10.8% 34.0% 7.0% 23.9% 15.2% 6.9% 2.2% 13.8% 32.1% 5.5% 27.4% 13.7% 6.9% 0.7%

1,564 4,904 1,003 3,455 2,198 994 312 14,430

Source: InBev 2007 Annual Report

Volumes grew by 5.2% in 2007, with 4.7% growth in beer and 8.6% in soft drinks. The beer industry overall has seen sluggish gains and an increase in competition with liquor and wine. There were three main issues that hurt the volume performance of InBev: market
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share performance in China and UK and industry contraction in Western Europe. InBevs UK volumes declined 10.3% in beer which result in a market share loss. InBevs beer volumes were also down in Germany and Belgium but InBev either maintained or increased market share. Inbev had organic volume growth of 3.0% in China which was lower than the market.2 InBevs volumes were strong in Latin America North, Latin America South, and Central and Eastern Europe. InBev is looking to increase their premium portfolio across the continents. EBITDA margin grew in five out of the six geographic zones. Western Europe was the only region to decrease. North America benefited from the addition of the Lakeport brands which grew throughout the year and the increase in distribution of the European imports in the U.S. InBev should focus on increasing their market share in China, UK, and U.S. InBev has the opportunity to increase its sales in the Russian and Chinese markets since these markets have the greatest potential growth in overall beer sales. InBevs Brands InBevs brands include Becks, Stella Artois, Hoegaarden, Brahma, Leffe, Becks Green Lemon, Staropramen, Skol, Chernigivske, Cass and Bergenbier. Becks is the number 1 German brand in the world and is distributed in more than 120 countries. Stella Artois is a premium lager that is distributed in more than 80 countries and has strong global potential. Hoegaarden is a Belgian wheat beer or white beer. In 2007, Hoegaarden grew by 9% overall. It also grew by 9% in the U.S. and tripled in Russia. Brahma is very popular in Brazil and has strong growth potential in Russia. Leffe is a Belgian brand of the Abbey beer. Leffe had a strong year in Western Europe and has a growing presence in North America. (See list of InBev Brands).

Anheuser-Busch Companies, Inc. Overview

Anheuser-Busch Companies, Inc. (A-B) is the top U.S. brewer and third largest world-wide brewer. A-B is best known for its Budweiser brands. The company was founded in 1852 as the Bavarian Brewery and was renamed to Anheuser-Busch companies in 1919. AnheuserBusch is based in St. Louis, Missouri. A-B employs 30,183 people worldwide and is
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traded on the New York Stock Exchange under the ticker: BUD. It owns 50% of Mexicos leading brewer, Grupo Modelo, and 27% of Chinas number one brewer Tsingtao. A-B also manufactures aluminum cans and operates a number of U.S.-based theme parks. Anheuser-Busch operates under four segments: U.S. Beer operations, International Beer Operations, Packaging Operations and Entertainment Operations.
1. U.S. Beer Operations: The domestic division is operated by ABI, a subsidiary of

the company. This segment not only includes its beer manufacturing and wholesale companies but also its operations in rice, barley and hops. The Budweiser, Michelob, Busch, and Natural brands are the core domestic brands of ABI. Also included in the domestic segment are specialty beers, malt beverages, non-alcoholic beers, craft and imported beers, waters, and energy drinks. A-B has developed partnerships with other companies to expand its business to provide long-term growth. A typical wholesaler now carries an average of 147 brands. Premium lights, crafts, imports and specialty beers have been key market drivers with todays consumers who want more choices. A-B formed partnerships with a number of companies to participate in this growth.

Craft beer sales increased 14.4% in 2007. ABI developed partnerships with brewers to take advantage of this growing market. A-B has alliances with Ray hill, Starr Hill, Widmer, Redhook, Kona, Goose Island, Old Dominion and Fordham and is now the third largest player in the craft beer segment.4 Import sales increased 1.1% in 2007. AB has import rights for a number of Asian and European brands such as Stella Artois, Becks, Bass pale Ale and other InBev brands. 4 A-B partnered with Cadbury Schweppes and developed new specialty beers including Budweiser and Bud Light Chelada. The sales of energy drinks are increasingly quickly and A-B participates with its alliances with Hansen Natural Corp to make and produce the 180 Energy Drinks and Monster Energy Drinks.

2. International Beer Operations: Through Anheuser-Busch International (ABII)

and Anheuser-Busch Europe Limited (ABEL), ABI brands are distributed worldwide. Breweries in the UK and China are operated by ABII. ABII also negotiates licenses with other foreign brewing companies and manages investments in foreign partners. International sales volume increased 5.2% in 2007 to 57 million
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barrels. Net Income increased 13.4% in 2007. 4 The international segment includes activities in the following countries:

Mexico: A-B owns 50% of Mexicos largest brewer, Grupo Modelo. Modelo is Mexicos only importer of the Budweiser brands and sales increased 27% in 2007. A-B received a cash dividend of $403 million in 2007, an increase of $160 million. The market value of A-Bs investment in Modelo is worth $10 billion (original investment was $1.6 billion) 4 China: China is the fastest growing beer market in the world. Budweiser is the top premium brand of beer in China. However, premium lagers hold only 19.9% of the China beer market by value and are far eclipsed by Standard lagers which hold 79.2%. A-B also own 27% of China brewer Tsingtao Brewing Co., Ltd. Tsingtao is Chinas second largest brewer with a 14% market share based on volume. China Resources Snow Breweries is the number one brewer in China based on volume with a 16.5% market share. SABMiller holds a 49% interest in China Resources Snow Breweries. A-B is currently building a brewery in Foshan, China, and it is scheduled to be completed later in 2008. it also owns Chinas oldest brewery, Wuhan International Brewing and Harbin Brewery. India: A-B formed a joint venture with Crown Beers international LTD to brew, market and distribute Budweiser and other brands in India. United Kingdom: Beer sales in the UK have been declining due in part to an increase in excise taxes and a smoking ban in pubs and restaurants. A-B is making efforts to reduce costs and increase its marketing to maintain the Budweiser image in the country. Canada: A-B has a partnership and joint venture agreement with Labatt Brewing Company, Ltd. Budweiser is the #1 beer in Canada and Bud Light is #7. Bud Lights volume in sales grew 30% in 2007. 4

3. Packaging Operations: Anheuser-Busch Packaging Corp

(ABPG) provides packaging materials for AB and helps the company to control the supply , cost and quality. ABPG operates under the following entities:

Metal Container Corp: produces more than 60% of the cans and 70% of the lids the company requires. It also supplies material to PepsiCo, CocaCola and Hansen natural Corp.

Anheuser-Busch Recycling Corp: one of the worlds largest recyclers of aluminum cans. It recycled 800 million pounds of aluminum in 2007 (equivalent to 26 billion cans) 4 Precision Printing and Packaging: prints the labels for A-B and other food and beverage companies. The company has been implementing process improvements to reduce costs and increase efficiency. Longhorn Glass Corp: produces 8% of A-Bs total glass bottle requirements, more than 800 million bottles in 2007. 4 Longhorn leads the industry in workforce safety standards.

4. Entertainment Operations: Busch Entertainment Corporation owns ten adventure

parks in the U.S. known as Worlds of Discovery. Each park offers unique adventures that allow guests to interact with the natural world. 2007 brought an increase in attendance and higher net profits. History Timeline The information for the following timeline was taken from Datamonitor and A-Bs Annual Report.

1984 Launched Budweiser in Japan and the UK. 1993 Invested 18% in Grupo Modelo in Mexico. 1995 Purchased majority interest in Chinese brewer Wuhan. 1996 Sold Campbell Taggart and Eagle Foods. 1997 Began brewing Kirin beers to increase its presence in the specialty beer market. 1998 Increased investment from 18% to 50% in Grupo Modelo. 1999 Sold its interest in Brazilian brewer Antarctica Paulista (now InBev). 2001 Purchased 20% Chilean brewer Compania Cervercias. 2002 Licensed Bacardi Silver Line 2003 Agreement with China brewer Tsingtao Brewery ownership to increase to 27% within 7 years.

2004 Acquired Harbin Brewery in China. Launched BE brand, beer with caffeine and various flavors. Added flavors to Bacardi Line. 2005 increased Tsingtao ownership to 27%. Berkshire Hathaway became large shareholder in AB. 2006 Michelob Ultra Amber introduced. Secured exclusive agreements with CBS, NBC and FOX for alcoholic marketing during the super bowl games in 2007-2011. Agreement with Hansen Natural to distribute Monster Energy Drink and other energy drinks. Purchased Rolling Rock from InBev USA. Launched Bud TV, internet based network to reach out to the growing of internet users. Launched energy drink 180 Blue. Signed exclusive agreement with Inbev to import InBev products. 2007 Agreement with Modelo to import Modelos beers into China. Formed alliance with Czech brewer Budejocky Budvar to import Czechvar Premium Czech Lager. Agreement with Hansen for AB to manage and coordinates sales & distribution of Monster Energy Drink to on-premise retailers. Agreement with Heineken for Heineken to import Budweiser in Columbia. JV with Crown Beers to brew and distribute Budweiser and other beers in India. Began importing Estrella Damm Marcelona in UK for Spanish brewer Grupo Damm. JV with Fordham Brewing Company to purchase old Dominion. Introduced Skipjack Amber.

Financial Highlights Anheuser-Busch focuses its efforts on three primary objectives to increase shareholder value: 1. Increase volume and profitability per barrel for the domestic segment.
2. Increase profit growth for the international segment. A-B has invested in its

marketing strategy to make the Budweiser brands recognizable worldwide. 3. Increase pretax profits and cash flow from packaging and entertainment segments. AB has shown significant increases in both dollar terms and volume for the years 20052007. Gross sales 4.1% from 2005 to 2006 and another 5.7% from 2006 to 2007. Net income increased 12.7% from 2005 to 2006 and 7.6% from 2006 to 2007. Beer in volume sold also increased each year. The number of barrels of US brands increased 2% over 2006 and 1.2% over 2005. The international brands had more significant increases due to the agreements with various companies to import international beers; 5.8% over 2006 and 9.3% over 2005. Each operating segment contributed to the increase in net sales and will be
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discussed later in this report. Following is a table comparing key financial information and volume sold per barrel for 2005, 2006 & 2007:
Anheuser-Busch, Inc Financial Highlights Years 2005-2007
(in Millions, except per share)

2007
$ $ $ $ $ $ 18,989 16,686 2,423 662 2,115 2.79

%inc
5.7% 6.2% 6.4% 12.5% 7.6% 10.3% $ $ $ $ $ $

2006
17,958 15,717 2,277 589 1,965 2.53

%inc
4.1% 4.5% 10.7% 18.2% 12.7% 13.5% $ $ $ $ $ $

2005
17,254 15,036 2,057 498 1,744 2.23

Gross Sales Net Sales Pretax Income Equity Income Net Income Diluted Earnings per Share
Volume in millions of barrels

U.S. International Equity partner brands Total Brands

104.4 24.0 33.2 161.6

2.0% 5.8% 4.9% 3.2%

102.3 1.2% 22.7 9.3% 31.6 19.7% 156 .6 5.6%

101.1 20.8 26.4 14 8.3

Source: Anheuser-Busch Companies, Inc, 2007 Annual Report

Anheuser-Busch was rated Americas Most Admired Beverage Company in Fortune Magazines 2007 Americas most Admired Companies. A-B ranked #1 in social responsibility and shows this commitment by investing in advertising campaigns to promote responsible drinking, environmental awareness and corporate philanthropy. A-B has invested $675 million since 1982 to promote responsibility and discourage alcoholic abuse and has worked with a number of cab companies to ensure more than 1 million safe rides home. A-B has been a leader in recycling to protect the environment. A-B has contributed more than $360 million to organizations that support education, health, social services, environmental conservation and more.4 Strengths and Weaknesses Based on Data Monitors 2007 SWOT analysis, A-B has a leading market position, 48.4% of US market and is one of the largest importers of international brands. A-B also has strong brand recognition and a strong network of breweries. Budweiser is one of the leading brands worldwide. Its Michelob and Busch brands are also popular in the US.
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Having strong brands makes A-B more competitive in the global market and will be discussed in the competition section of this paper. Weaknesses of A-B include high dependence on domestic beer division and poor liquidity position. In 2007, domestic beer sales account for 73% of the total net sales while the other segments total 27%. Debt increased in 2007 and the current and quick ratios are low, 89% and 57% respectively. Low ratios mean that the company does not have enough current assets to cover the debt. While A-B already has a presence in China and Russia, there is still room to expand. Consumers are starting to be a little more health conscious and there is a growing trend in consumption of energy drinks and non-alcoholic or low calorie beverages. A-B has partnered with Hansen to distribute Monster Energy and has also developed the 180 brand. Changing consumer behavior is also considered a threat to A-B. Whether it is consumers turning to the non-alcoholic beverage or trying new brands of beer, there could be a decline in beer sales. Government regulations also can be costly and increase the cost of doing business in various countries. Marketing Channels The marketing channels are categorized as on-premise or off-premise. On-premise channels consist of bars, restaurants, and theme parks. Off-premise includes grocery stores, liquor outlets, convenience stores and any other form of retail outlet. The U.S. has a three tiered system consisting of manufacturers, distributors, and retailers. Manufacturers sell to distributors that sell to the retailer. Manufacturers in the U.S. are not permitted to sell directly to the retailer. Unlike the U.S., the UK has a two tiered system. Manufacturers sell directly to the retailer.

Competitive Landscape
The global beer market is fragmented, with the top three players holding an aggregate share of around 30% of the total market by volume. Beer producers are considered players and retailers and on-trade companies (clubs, restaurants, etc.) are considered buyers. In many countries the market can be easily entered by microbreweries. Switching costs are not high but buyers like the large retailers need to offer a wide variety so overall buyer power is
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moderate although it can be stronger in some countries depending on regulations. Major players may offer specialty beers, but much of their business involves products for the mass market. The need to operate large breweries implies high fixed costs and low margins which boosts competition. Economies of scale of production become more important. Beer manufacturers can differentiate themselves via strong brands. Main inputs for beer include malted grain, hops, bottles and barrels. For the most part, beer makers are non-vertically integrated however some of the large players like SABMiller grow their own hops, weakening supplier power. However, the quality of the inputs is very important so supplier power is moderate. Access to a strong distribution is not a big barrier to entry as in many countries the smaller players (microbreweries) can also run their own pubs and outlets and can convince the local supermarkets and on-trade businesses to carry their products. In some countries, the distribution and sale of alcohols is highly regulated and access to a distribution channel is a barrier to entry. 5 The global beer market generated revenues of $401.4 billion in 2007, representing a CAGR of 2.1% for the period 2003 2007. The performance of the market is forecasted to follow a similar pattern for the five year period 2007 2012 with a CAGR of 2.2% and a market value of $446.4 billion by the end of 2012. Europe is the leading region in the global beer market, with 49.5% share of the markets value followed by the Americas with 28.6% and then Asia-Pacific with 21.9%.

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TOP GLOBAL BREWERS USD, $ millions

Company InBev Diageo PLC Anheuser-Busch Cos. Inc. SABMiller PLC Heineken N.V. Kirin Holdings Co. Ltd. Fomento Economico Mexicano S.A. Grupo Modelo S.A.B. de C.V. Scottish & Newcastle PLC Molson Coors Brewing Co. (Cl B) Asahi Breweries Ltd. Foster's Group Ltd. San Miguel Corp. Constellation Brands Inc. (Cl A Sapporo Holdings Ltd. Asia Pacific Breweries Ltd. Tsingtao Brewery Co. Ltd. Central European Distribution C Vidrala S.A. Boston Beer Co. (Cl A) Pyramid Breweries Inc. Market Value as of 4/18/08 56,427.4 52,995.4 34,544.2 33,148.2 29,043.5 18,508.2 15,894.2 15,105.3 14,854.7 9,823.3 9,813.3 9,455.8 4,872.8 3,909.4 3,188.5 2,515.1 2,470.5 2,395.5 750.2 606.7 14.4 FY07 Sales 21,097.4 15,419.2 16,685.7 20,057.0 18,369.2 16,122.9 13,519.5 6,773.5 6,635.0 6,190.6 13,105.4 4,165.1 5,246.8 4,030.8 4,019.3 1,302.6 1,673.8 1,189.8 445.7 341.6 47.7

Source: Reuters On-line Global Fundamentals

The Segments

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Anheuser-Busch has four segments: domestic beer (aka U.S. beer), international beer, packaging and entertainment. For the full FY ended December 31, 2007, % of Net Sales by segment was as follows: % Net Sales US Beer 73% International 7% Packaging 10% Entertainment 8% Corporate & Elims 2%

Source 6: Anheuser-Busch press release, Anheuser-Busch Cos. Reports Increased Sales and Earnings for the Fourth Quarter and Full Year 2007, Jan 31, 2008

U.S. (Domestic) Beer Segment The U.S. (Domestic) beer division includes U.S. beer manufacturing and company-owned beer wholesale sales operations, including vertically integrated rice, barley and hops operations. In addition to investing in its core brands (Budweiser, Michelob, Busch and Natural), Anheuser-Busch is responding to market demands from more choices. Craft beer sales were up 14.4% in 2007 in the U.S. market. A-B has developed its own specialty beers and forged partnerships with several craft brewers. A-B is now the third-largest
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player in the craft beer segment. Imports were up 1.1% in 2007.

A-B has secured the

import rights for a number of premium Asian and European brands, including Stella Artois and other select Inbev brands. A-B now has a 7% direct market share of the import segment.7 The US beer market grew by 1.3% in 2007 to reach a value of $78.3 billion. The

compound annual growth rate of the market for the period spanning 2003 2007 was 1.4%. The market is forecasted to follow a similar pattern for the five-year period 2007 2012 and will grow to $83.2 billion by the end of 2012 and is forecasted at a 1.2% CAGR. . The US beer market is concentrated, with the top three players holding an aggregate share of approximately 80% of the total market by volume.
Anheuser Busch Co., Inc. SABMiller Molson Coors Brewing Co. Other 57.6% 20.1% 12.0%. 10.3%

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International Segment The International Beer segment includes Anheuser-Busch International (ABII), a wholly owned subsidiary. It operates in the UK and China. And it negotiates licenses and brewing agreements on behalf of A-B with foreign brewers and negotiates and manages equity investments in foreign brewing partners. ABI brands are marketed, distributed and sold in more than 30 countries. Here are some important international markets where ABII has a presence. Mexico: The Mexican market grew with a CAGR of 2.3%, over the 2003 2007 period, to reach a value of $10.2 billion in 2007. The Mexican market will grow to $11.1 billion by the end of 2012 and is forecasted at 1.8% CAGR. 8 A-B has a 50% equity interest in Grupo Modelo, Mexicos leading brewer. Modelos flagship brand is Corona, the fifth
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best-selling beer in world. Modelo maintains a 56% market share of the Mexico market. FEMSA is #2 in Mexico with 43.2% market share by volume.7 China: The Chinese beer market remains fragmented with the top three brewers owning only 30% of the market. SAB Miller owns a 49% interest in Chinas largest brewer, China Resources Snow Breweries. A-B has a 27% interest in Tsingtao Brewery. A-B has a 97% equity
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interest in Budweiser Wuhan International Brewing. A-B owns 100% of Harbin Brewery Group, the fifth largest brewer in China. Harbin has 13 breweries in NorthEast China.

China generates approximately 37.8% of the overall Asia-Pacific beer market. The Chinese beer market grew by 8.6% in 2007 to reach a value of $33.2 billion. This represents a CAGR of 8.7% for the period spanning 2003 2007. In 2012, the Chinese beer market is forecasted to have a value of $48.7 billion, an increase of 46.9% since 2007. The performance of the market is forecasted to decelerate, with a forecasted CAGR of 8% for the period spanning 2007 2012. 10

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India: A-B and Crown Brews International, Ltd formed a joint venture to brew, market and distribute Budweiser and other brands in India. The JV includes a new state of the art brewery in Hyberabad that was completed in March 2007. In June, the first locally produced Budweiser became available in southern and western India, just after the introduction of Armstrong, the JVs new premium strong beer. With its strong economy, large population and a growing middle class, India offers good long-term potential for A-B.
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The India beer market grew by 10.2% in 2007 to reach a value of $2.5 billion. In 2012, the Indian beer market is forecasted to have a value of $3.9 billion, an increase of 53.9% since 2007. CAGR for the period 2003 2007 was 10%. The market is forecasted to decelerate with an anticipated CAGR of 9% for the five year period 2007 2012. The beer market in
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India is dominated by large, multinational breweries with United Breweries owning 45.5% of the market and SABMiller owning 34.20% of the market.

Canada:

In Canada, A-B has a very successful partnership with Labatt Brewing

Company which is owned by Inbev. A-B and Labatt first partnered in 1980 and today have a licensed brewing, distribution and joint marketing agreement. Budweiser is the No. 1 beer in Canada, and Bud Light is the fastest growing beer. In Canada, the provincial governments regulate the beer industry, particularly the regulation of pricing, mark-up, container management, sale, distribution and advertising of beer. Distribution and retailing of alcoholic products involves a wide range and varied
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degree of Canadian government control through their respective provincial liquor boards. The Canadian brewing industry is a mature market. It is characterized by aggressive competition for volume and market share from regional brewers, microbrewers and foreign brewers as well as Molson and Inbev. These competitive pressures require significant annual investment in marketing and selling activities.11 In 2007, the Canadian beer market grew 1.7% to reach a value of $10.1 billion. In 2012, the Canadian beer market is forecast to have a value of $10.9 billion, and increase of 7.7% since 2007. This represents a CAGR of 1.5%. In 2007, Inbev holds a 46.5% market share by volume, Molson holds a 42%, Moosehead holds 6.10% and other companies hold the remaining 5.3%. 12

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United Kingdom: Budweiser, Bud Ice, Bud Silver, Michelob, and Michelob ULTRA are brewed and packaged at the Stag Brewery near London, England. A-Bs volume in the UK was down 9.6% in 2007. A-B attributes this to increases in excise tax, new smoking bans and unfavorable weather.7 The UK beer market grew by 1.1% in 2007 to reach a value of $43.2 billion. This represented a CAGR of 1.4% for the period 2003 2007. The performance of the market is forecast to decelerate, with an anticipated CAGR of 0.9% for the five year period 2007 2012, which is expected to drive the market to a value of $45.2 billion by the end of 2012. The UK accounts for 21.7% of the European beer market by value. Scottish & Newcastle is the leading company in the UK market, with a 26.9% share of the markets volume. Molson Coors holds a 19.8% market share.13

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Market Update
Overall Environment Its getting more expensive to make beer - The cost of brewing beer has increased worldwide and is impacting all brewers. Increased steel prices have resulted in the cost of a keg doubling over the past five years to $165 USD. The price of aluminum for cans is also going up. Energy prices are increasing. The prices of malt and hops have also increased significantly in 2007 and 2008 due to worldwide shortages. Because hops have sold for less than the price of other crops, the worldwide hops acreage decreased almost 51% from 1994 2006. These shortages are also attributable to increased demand for beer, bad weather destroying crops, and increased demand for corn in the US and other countries for the production ethanol.14 Tastes are changing - Over the past decade, sales of distilled liquor, wine and imported beers have grown much faster than beer sales. Consolidation Trend A two year lull in large acquisitions in the brewing industry came to an end in October 2007. SABMiller and MolsonCoors merge U.S. Operations: On October 9, 2007, London-based SABMiller and Denver-based MolsonCoors announced they will be combining their brewery operations in the U.S., creating a brewer called MillerCoors. This deal was done in order to more effectively compete against Anheuser-Buschs stronghold on the U.S. market. This merger will result in estimated cost savings of $500 million for MillerCoors. The merger will result in Coors and Miller gaining access to each others distribution network and give both companies more exposure. The $500 million in savings cost savings will help ease the impact of increasing price of materials and ingredients. MillerCoors will be able to negotiate long-term pricing agreements that will help them avoid unexpected, drastic price increases. And theyll be able to reinvest in their business.
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Carlsberg and Heineken acquire Scottish & Newcastle

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Also in October 2007, Carlsberg and Heineken announced their intentions to acquire Scottish & Newcastle, Britains largest brewer. Carlsberg and Heineken will divide Scottish and Newcastles assets between them and share the bill, with Carlsberg taking a slightly larger part. The deal is unusual because Heineken and Carlsberg are helping each other in markets where they are direct competitors. They paid $15.4 billion USD for the company which represents a 26% premium. 15 SABMiller to Acquire Grolsch On November 19, 2007, SABMiller announced it had entered into an agreement to acquire Dutch brewer Grolsch for $1.2 billion USD. The Grolsch brewery dates back to 1615. Grolsch accepted a bid of 48.25 Euros a share in cash which is 79% more than Grolsch's previous close.16 SABMiller Overtakes InBev to Become the Worlds Largest Brewer Size matters in the beer market as larger companies can negotiate more favorable terms with suppliers and distributors. Large brewers have more brewing facilities which mean lower distribution costs and fresher product they often dont have the ship their product as far as smaller brewers with fewer brewing plants. Typically size is measured in terms of volume and barrels per year. According to Reuters on February 5, 2008, Global brewing group SABMiller moved ahead of Belgiums InBev to become the largest brewer due to growth in China and its purchase of Grolsch. The London-based brewer of Miller Lite, Peroni and Castle recently became the leading brewer in the worlds biggest beer market of China led by the success of its Snow beer - and agreed to buy GrolschAs a result of its acquisition of Scottish & Newcastle, Dutch brewer Heineken jumped ahead of Anheuser Busch to become the third largest brewer.17

Why Do the Deal?

In 2008, both the Wall Street Journal and Financial Times have reported that InBev and AB were in talks. The SABMiller MolsonCoors JV increases the speculation of an InBev AB acquisition. However, talk of InBev acquiring Anheuser predates SABMillers JV with MolsonCoors. The current weakness in the dollar is one reason why it might make sense to do this deal now, however, its anticipated that the currency will rebound. Therefore the
26

weak dollar is a consideration but not a major reason to do the deal. Here are some reasons why InBev and A-B would do the deal. Aligned with InBevs Strategy InBevs acquisition of A-B is aligned with InBevs mission and strategy as stated in its 2007 Annual Report. Our aim is for top line growth and strong brand equityThe goal of targeted external growth is to strengthen our position in developed markets, and continue to maximize opportunities in high-growth markets. Upside from Applying Cost Efficiencies to A-Bs Operations Cost savings is the key motivator for this deal. InBev has proven itself adept at its strategy of relentless focus on World Class Efficiency through initiatives like Voyager Plant Optimization, Zero Based Budgeting and maximizing purchasing power. Ambev has been a driving force behind this focus on efficiency. Inbev could apply these same efficiency programs to Anheuser-Busch. According Citigroup Analyst Philip Morrisey, InBev would be interested in a deal with A-B due its historical track record of value creation and potential for significant cost savings and greater geographic stability. In an analysis we determined that the combination of the two could generate anywhere from $4 billion to $10 billion, said Citigroup Analyst Bonnie Herzog.
18

Per Trevor Stirling, analyst at Sanford

C. Bernstein, We believe that the combination of A-B and InBev has the potential to create significant economic valueIn our view, the direct synergies are relatively modest. We believe direct synergies are limited to duplicated costs in China, the U.S., the UK and corporate headquarters. In total, we estimate such synergies could boost annual operating profits by a modest $350 - $370 million per year. The biggest hypothetical upside would come from applying Brazilian cost control techniques to A-Bs operations in the USA.19 According to a February 5, 2008, Dow Jones article, Inbevs investors are likely to favor another major move. After all, they saw significant value delivered from the Ambev and Interbrew merger that created InBev in 2004. Financially, an A-B takeover makes sense. Based on the 1.8% savings to total costs when Interbrew bought AmBev, a combined InBev-Anheuser could have synergies of around EUR120 million. Taxed at 19% and capitalized at 7%, those savings are the equivalent to EUR 1.1Billion in todays money,
27

assuming they are achieved in three years. An offer of $59 a share would represent a bout a 10% premium to A-Bs share price high of $54 in early January.20 Geographic Logic InBev dominates Brazil and has large stakes in Europe and China while Anheuser-Busch controls almost 50% of the U.S. market. While Anheuser-Busch has a strong presence in Mexico and a growing presence in China, they still get over 73% of their revenues from the U.S. Beer Segment. The International Beer Segment accounts for only 7% of revenues. InBevs acquisition of Anheuser-Busch makes geographic sense as there are not a lot of overlaps and no major divestitures would be needed.19 Per Bear Stearns Analyst Craolo Laboy, Anheuser would be the most viable candidate for an InBev acquisition because the two have minimal geographic overlap. Combined the brewers would control 25% of the global beer marketThe combination would have market leading positions in the U.S., Brazil, Germany and China, the top four beer markets in the world in terms of volume.21 Anheuser Needs a Broader Earnings Base According to the Wall Street Journal, the attraction for Buds perspective would be increased access to emerging markets. New CEO August Busch IV has stated his desire to regain the companys global leadership position. At a Lehman Brothers Consumer Conference in September 2007, August Busch IV said, We do have aspirations to regain our global beer leadership positionWe need to look to diversify our global footprint in the years aheadthere are numerous strategic studies underway. A-Bs international presence lags InBev and SABMiller. A-Bs relatively small international presence is one factor driving speculation around an InBev A-B combination.22 In July 2007, Citigroup analysts said they believed merging with another large brewer was A-Bs only option to compete in the global beer market. A-Bs growth is lagging behind its rivals such as InBev, SAB Miller and Heineken all of whom have a greater presence in emerging markets. Shares of these companies created from international partnerships have performed better than A-Bs. Per analyst Bonnie Herzog, They [A-B] can introduce new products and they can have a number of initiatives, but they still face execution risk and at the end of the day, its a global beer industry.18
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Core Brands Declining Sales of the companys core brands declined slightly last year, which heightened concerns about A-Bs future. While A-B dominates the domestic beer market, it faces increased competition from craft brewers, imports and distilled spirits and wines. Anheusers stock price trades approximately where it did five years ago.
23

One UBS analyst said in July

2007, We expect sequential improvements in A-Bs fundamentals over the next twelve months, but valuation and concerns on the core business keep us on the sidelinewhile import deals are off-setting the weakness, we believe A-B needs to improve the performance of its core brands which still generates the bulk of its profits. 24 According to a February 1, 2008 article in the Wall Street Journal, InBev and Anheuser already held discussionsthey have become more serious, and deal is possible this year, people in the industry say.Yesterday, Anheuser declined to discuss speculation of a deal with InBev. But the company reported fourthquarter financial results that underscored why some analysts believe it may want a merger. U.S. beer sales to retailers rose only 1.3% by volume, with growth coming from import brands rather than Anheusers domestic brews.25 Distribution Agreement InBev and Anheuser-Busch formed a distribution agreement in November of 2006. Anheuser-Busch agreed to become the exclusive U.S. importer of certain InBev brands effective February 1, 2007.
26

These brands included Stella Artois, Becks, Bass Pale Ale,

Hoegaareden, Leffe, and some other selected InBev brands. Anheuser will be responsible for their sales, promotion and distribution in the United States. These InBev brands, which had sales volume of about 1.9 million hectoliters (or about 1.5 million barrels) in 2005, will be available to Anheuser-Buschs U.S. wholesaler network where possible.
26

InBevs Canadian Brands, including the Labatt products, are not included in this agreement. The terms of the agreement were not included in the filing. The 2007 InBev annual report includes that the agreement permits either party to terminate the agreement without penalty if there is a change in control with respect to the other party becoming or acquiring an affiliate of a competitor. Anheuser-Buschs president stated that this agreement helped the company with the strategy of increasing its participation in the high29

end U.S. beer segment and in diversifying their products. InBevs CEO commented that it helped InBev increase its access to the U.S. consumer and increase their growth. 2007 was the first full year of this agreement. This agreement continued the strong growth of Stella Artois. The rumors are flying around the industry that this distribution agreement is seen as a precursor to a merger. Also, InBev subsidiary Labatt, has a license to brew Bud Light in Canada. A-B lists the Acquisition of InBev brands import rights on their 2007 balance sheet as being worth $65.9 million.

Synergies
Together, InBev and Anheuser-Busch would represent the largest worldwide beer company. By combining the efforts of both companies, InBev could recognize several cost cutting and revenue enhanced synergies. A-B already has an agreement in-place to import the InBev brands and through the acquisition by InBev, the company could reduce costs while still reaching out to the U.S. beer segment. Synergies incluse the following:

Reduce redundancies by laying off employees who do the same type of work. This would include management, administrative, marketing and manufacturing jobs. This would also optimize the production process. InBev closed its Connecticut office after exclusive import rights were agreed upon with A-B. Reduce shipping distance: InBev would now be able to brew within the United States for domestic distribution and save on the shipping of imports. A-B also owns its own packaging division so the company would keep costs down by utilizing its own division for labels, bottling, etc. Geographic diversification: Currently there is very little overlap so the two companies would be able to reach out to a bigger geographic area without building new facilities and applying for licensing in new countries. InBev could potentially reduce facilities in locations where there is overlap to consolidate the operations. Increase Revenues: Revenue synergies will be gained from new sales opportunities of existing products. InBev and A-B could cross sell and market products through different distribution channels and geographic regions. The combined company could leverage the stronger relationships in particular markets. Eliminate duplicate costs in China, U.K., U.S. and Russia: A-B already has a huge presence in China and duplicate costs could be eliminated by utilizing the facilities already owned by A-B. InBev has already announced layoffs in the U.K. of about 166 jobs. We estimate that such synergies could boost annual operating profits by $350-$375 million per year.
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Increase EBITDA Margins & Reduce Costs: InBev has historical low COGS and SGA expenses in relation to sales. InBev could apply the same principles to the AB companies to achieve low costs as well. InBev incorporated many of the cost cutting measures and financial efficiencies that were a way of life in AmBev. The Voyager Plant Optimization program and Zero-Based Budgeting initiatives could be applied to the A-B operations. Other costs synergies come from economies of scale such as greater purchasing power and elimination of some intermediaries in the supply chain. Reduce R&D expenses: There should also be some cost synergies realized in Research & Development (R&D). The market has been shifting towards distilled liquor, wine, and imported beers. These companies are trying to invent new products to stay ahead of the curve. Combining companies would help cut down on the investments in these new products.

Integration Plan
Employee Retention

Get agreement from key execs to stay on and continue to lead the company Name August Busch IV President of the North America Business Unit. Prior to announcing the acquisition, identify other key execs and employees. Reach out to them and motivate them to stay for a specific period of time to hit specific performance measures.

Integration Team

Appoint leadership from both Inbev and A-B Hold specific people accountable within each business group for achieving performance targets. Appoint persons with significant amount of experience in M&A integration and leverage this team across multiple mergers and acquisitions (the more mergers you do, the better you will get at it). Monitor the team to increase performance

Human Resources

Get the me questions answered quickly Immediately message to A-B community what they can expect over the next 30 days. Welcome to Inbev sessions Eliminate overlaps in IT, HR, Finance and Corporate. Act quickly and let employees know who will be transitional and who will be permanent employees.
31

Treat all employees with respect to maintain morale of both transitional and permanent employees. HR benefits overview and enrollment Have on-site Inbev persons available for first 6 months following the announcement. Identify persons who cant make the adjustment to the new enterprise and culture and help them put together an exit strategy.

Communication Plan
Internal Communication

WebEx from leadership of both companies Establish an integration website(s) for both Inbev and A-B employees that is updated frequently and contains all communications about the acquisition. Constant and ongoing communication better too much than too little Establish a site on the Inbev intranet site to explain why Inbev acquired A-B, and how to position it.

Customers

Messages to key customers including distributors, retailers and on-trade companies. Include any value created for the customer as a result of the acquisition Be sure that A-B and Inbev account leads are talking with customers to understand how to engage on a go forward basis- and how they would like to engage. Meet with distributors who will expand their relationships with Inbev and A-B to set expectations and explain the increased competitiveness of the new organization and what it means to them: more choice and better service for retailers

Analysts and Press Joint presentations to analysts explaining the value of the acquisition and why it was done Be open and cooperative and answer their questions

Shareholders Information must be available immediately when the announcement regarding the acquisition is made. This information must detail potential synergies and create confidence that they are realizable. Information regarding next steps and logistics must be made available immediately as well.

Government
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File necessary documents with regulatory and other government entities to them know in detail about the acquisition.

Finance

Inbev has been in the process of centralizing its F&A functions and creating shared service centers at its Belgium HQ. Top leadership is also being centralized in Belgium. As with Ambev, identify appropriate and key A-B execs to transfer to Belgium HQ. (English is the business language at Inbevs Belgium HQ). Consolidate Inbev and A-Bs Americas F&A staff Appoint lead within A-B for Zero Based Budgeting initiative.

Systems Get everyone onto Inbevs systems and hardware as soon as possible.

Facilities & Manufacturing

Close and consolidate A-B and/or Inbev offices where possible Determine how to best leverage Inbev and A-B breweries so as to achieve manufacturing efficiencies and allow beers to be brewed closer to their distributors. Appoint lead within A-B for Voyager Plant Optimization initiative.

Marketing

Meeting with key marketing leads and brand managers from both Inbev and A-B to understand opportunities for cross selling i.e., selling more high growth brands (Stella Artois, etc) the United States and Canada without cannibalizing existing sales of A-B Understand opportunities to sell A-B around the world, particularly in high growth markets such as China and Russia. Identify overlap and determine which brands to sell Review local markets and preferences Identify opportunities for cross-marketing and getting greater return on marketing investments.

Procurement Leverage scale to capitalize on opportunities for volume purchasing and more favorable supplier pricing

Set Clear Business and Financial Targets

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 Sales

These will correlated to the synergies

Leverage knowledge learned through distribution agreement Identify opportunities to cross sell brands through existing distribution channels Educate existing distributors about new products and positioning

Cultural Issues
InBev is based in Belgium and Anheuser-Busch is based in St. Louis, Missouri. The combined company would face some difficulty in the integration process from blending to company cultures based in two different countries. InBev has experience with this integration process. InBev was formed in 2004 by the merger of Interbrew and Ambev. Interbrew was based in Belgium and AmBev was based in Brazil. The experience of blending these two large companies will be helpful in the integration of InBev and A-B. The language barriers will not be a problem since English is the business language spoken at InBevs headquarters in Belgium. This process went smoothly in the Interbrew and AmBev integration. The CEO at that time even learned Portuguese. 33 The main challenge would be the integration of InBevs cost and financial discipline to A-Bs environment. InBev has integrated this discipline into Interbrews systems since the strong financial discipline was an AmBev characteristic. This cost cutting application has helped the company increase its margins. Carlos Brito is the CEO of InBev. He held various positions at AmBev including positions in finance, operations, and Sales.1 He was appointed CEO of AmBev in 2004 so he has experience with the AmBev and Interbrew integration. He took over as CEO for InBev at the end of 2005. During the Interbrew and Ambev integration process, the company used executive reward programs to promote the successful integration of these two different companies. This system focused on the business objectives and supported organizational alignment. Following the integration plan listed above and using past experience and knowledge, will lead InBev and A-B to a successful integration.

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Regulatory Issues
Facing low prospects for volume growth in mature, developed markets and increased competition, brewers continue to seek growth through acquisitions of other brewers or by aggressive participation in developing markets.27

InBev acquiring Anheuser Busch would have to be approved by the Federal Trade Commission in the United States and the European Commission for the European Union. The Federal Trade Commission is an independent agency of the U.S. government and it is responsible for preventing anticompetitive business practices. practices.28 This division reviews proposed mergers. Monopolization is defined under the Sherman Antitrust Act. Section 1 states the following Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony. The government is responsible for investigating these situations. There are two elements to section 2 that have set precedent. First, the defendant possess monopoly power in a properly defined market and second that the defendant obtained that power through conducted deemed unlawfully exclusionary. This conduct must exclude competition on basis other than efficiency. The realization of economies of scale and product improvement, product innovation is considered lawful since it is created by normal economic forces. Recently, it has become more relaxed when ruling on monopolies. Excluding rivals is considered lawful if supported by a valid business reason. There is also a chance for an appeal and the FTC ruling can be overturned. The FTC sued to block the merger of Whole Foods and Wild Oats on the basis that the merger would constitute an anticompetitive combination of the top two competitors in the highly concentrated market for premium natural and organic marketplaces.29 This claim was based on the FTCs reasoning that these were the only two niche type supermarket chains and they would eliminate this niche market. The FTC did not prove that if Whole Foods/Wild Oats (the new combined firm) raised prices that consumers would not switch to alternative supermarkets to buy products. The merger of InBev and Anheuser Busch
35

The Bureau of

Competition is the specific division of the FTC in charge of preventing anticompetitive

would leave the same options for a consumer in the U.S. Inbev is a much smaller player in the U.S. market and is already distributing many of their European imports through A-B. U.S. consumers would not be hurt by this acquisition since alternatives still remain in the market. As of the end of 2007 per the Datamonitor report, Anheuser is holds the top position in the US by volume with 57.6%. SAB Miller held 20.1% and Molson Coors held 12%. The announcement of the SAB Miller and Molson Coors joint venture took place in October of 2007. Through this joint venture, SAB Miller will have a 58% economic interest in the venture and Molson Coots will own 42%, but they will have equal voting rights. The two companies will conduct all of their U.S. business through this joint venture. The transaction between InBev and Anheuser-Busch seems much more feasible now that there is a joint venture between the number #2 and number #3 brewers in the U.S. and there has been an emergence of many smaller brewers in the competitive landscape. The U.S. beer market generated total revenues of $78.3 billion and 25.4 billion liters in 2007. 8 The SABMiller and Molson Coors joint venture creates an estimated market share of 31%. It is estimated that A-B and InBev combined would control 25 percent of the global beer market. 30 The combination would have them in the leading market positions in the U.S., Brazil, Germany, and China, the top four beer markets in the world by volume. InBev is the worlds largest brewer by volume in the world until SABMiller completes its purchase of Grolsch. SABMillers moves in the industry are setting precedence and will help in the antitrust clearance process for the InBev and A-B transaction. The HerfindahlHirschman Index is being pushed up by this joint venture and it doesnt seem to be hurting their chances of gaining regulatory approval under the Bush administration. The US Department of Justice did request further information from the companies in November to evaluate the joint venture but many analysts say SABMiller and MC will still gain approval. The emergence of smaller brewers would also make this deal more feasible. Supermarkets and restaurants would play a large role in the antitrust review process. They are the two main buyers of beer. InBev would have to prove that economies efficiencies would benefit the consumer more than they would be harmed by any potential anticompetitive effects. The merger of InBev and A-B would also have to gain approval in the European Union. The European Commission is the executive arm of the European Union that handles
36

antitrust issues. The main legislation for merger decisions is the EC Merger Regulation and the Implementing Regulation. The Merger Regulation contains the main rules for the assessment of concentrations, whereas the Implementing Regulation concerns procedural issues (notification, deadlines, and right to be heard).
31

The European Commission has

blocked mergers only when they would have left a single company dominating a market. InBev had 23.9% of its revenue coming from Western Europe and 15.2% of its revenue coming from Central and Eastern Europe. Anheusers share is smaller in the European Union and consumers will still have plenty of other options in the marketplace. The European Union gave the SAB Miller and Molson-Coors joint venture approval in early April. The InBev and A-B transaction should work out the same.

Source: Cartoonstock.com

Why would the Busch family sell now?

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While the Busch family only controls less than 4 percent of A-Bs shares, it still holds a lot of influence with other shareholders. The Busch family would lose its influence over the shareholders and the board. August Busch IV was named President and CEO in May 2007. He is 43 years old. He took over this role from his father August Busch III who remains chairman of the board. According to Forbes, Loyalty to he Busch family remain strong although there has been some question of August Busch IVs suitability for leadership. August Busch IV probably wont want to give up the company since he hasnt been in his CEO position for that long and he wont want that to be his legacy. He has a long-standing reputation as a party boy and was involved in a car accident that left a female companion dead in 1983 when he was an undergrad at the University of Arizona in Tucson.32 We would recommend changing InBevs name to InBev Busch and naming August Busch IV as the President of InBev Busch in the U.S. in order to complete the deal. The Busch familys influence would demand a take-over premium.

Financial Valuation (DCF and Multiple Models)

We began by using the Discounted Cash Flow Model (DCF) to obtain a stand-alone value of both InBev and AB. (Appendices 1-6) We did this for a few reasons: 1) To screen the target, AB, in order to determine if we felt it was under- or over-valued 2) To screen our own stock price which would help us in determining our payment strategy should we decide to purchase AB. Stand Alone Values, Based on our sensitivity analysis:
InBev Valuations Low Medium 44.86 A-B Valuations Low Medium $43.63 High 51.52 60.30

High $52.00 $63.11

InBevs sales growth has increased 8.4% in 2007 and 14.2% in 2006. A-B sales growth has increased 6.2% in 2007 and 4.5% in 2006. These two companies are consistently beating the average market growth. We have scaled back on these assumptions based on the market forecast listed above for the next several years. What we found was that based on relatively conservative assumptions, as outlined in the exhibit, the value of InBev stock is slightly over-valued and the value of ABs stock is
38

slightly under-valued. As an acquirer, this is good news. This allows InBev to use its Treasury Stock at a slightly higher price to purchase more shares of AB at a slightly lower price. The following table represents a range of share prices that we would find acceptable for negotiations with AB. The Low End column of the table represents the current stock price for Bud plus the proposed 12% premium and the High End column represents the 15% walk away premium.
Budweiser - Acceptable Price Ranges/Share for Negotiations Low End High End Dollars $52.96 $54.38 Euro 33.43 34.33

It is important to remember that we calculated a fair market value of $52/share of Bud stock and the current market price (at the time of this writing) is $47.29. Given this $5/share disparity, we feel even more comfortable offering a 12% to 15% premium, even though at 15% we are giving away approx 90% of the estimated synergies because we feel that we are buying AB at a $5/share discount. Of course, we as InBev are not going to clue in AB of this fact. We are simply going to hold onto this as a form of insurance in case some of our synergies or implementation plans dont work out. We next gathered relative multiple information from FactSet (Appendix 7). We narrowed down the list of comparable firms based on market value, sales, and earnings in order to be sure we were analyzing comparable firms. Based on the P/E and P/Sales multiples, we feel that the market is pricing these firms mainly based on these criteria.

Synergies
We next looked at where we felt the synergies would come from in the form of revenue enhancements and cost savings. As Appendices 8 and 9 illustrate, we would expect to generate 300 million within one year after completion of the deal and grow that revenue at a rate of 20% in years 1, 2, and 3, 10% in year 4 and 3% in year five and maintain that level of growth into the future. By far the largest amount of synergies comes from the cost saving/operational improvement methods we would expect InBev to employ. We applied a slightly higher growth percentage into perpetuity given that it is one of InBevs core strengths to improve operating efficiencies.
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We felt the funds required to invest to achieve the synergies could come from, in part, the $250 million in cash that AB has on its balance sheet as well as the 1.5 billion that InBev has on its balance sheet.

Combined Firm Financials

Appendix 10 outlines our estimation of firm value and accretion to the value of InBevs share price based on a 12% premium offer for Buds share. Appendix 15 demonstrates that a 12% premium for Buds shares is in line with other premiums paid for similar firms. In addition, we wanted to leave ourselves room to come up in price should Bud initially balk at our offer. Appendix 12 shows that our walk-away price is actually based on a 15% premium. We chose this threshold because once we exceed a 15% premium; we exceed 95% of the synergies that we estimate generating. We feel that any price that exceeds a 15% premium would be too risky to take on should we not realize 100% of the estimated synergies.

Deal Structure
Appendices 11 and 12 outline our deal structure and Appendices 13 and 14 illustrate the impact of the +/- 2% collar we placed on the deal due to possible fluctuations in exchange rates. Given that InBev went through such an aggressive share repurchase program in 2007, we decided to use approx. 400 million shares currently held in Treasury Stock to purchase 100% of Buds stock at an initial 12% premium offer in a stock-for-stock transaction. We wanted to use a stock-for-stock transaction for a number of reasons: 1) We felt that InBevs stock was slightly over-valued 2) We felt that Buds stock was slightly under-valued 3) The Euro is strong against the Dollar which works in our favor 4) The transaction is tax deferred for InBev 5) Is relatively simple

40

6) InBev repurchased a large amount of its stock in 2007. This is currently being held as Treasury Stock and was done, in our opinion, for use in a transaction exactly such as this.

Conclusion
Based on the fact that this is a mature industry and consolidation is going to happen whether the major players, we feel that Bud will have little choice but to approve the deal. We feel that the 12-15% premium is what is most likely to be settled upon and would endorse it at that level based on InBevs expertise at operations management and cost cutting.

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Appendix 1 - InBev
Aussumptions: DCF, Medium Growth Extraordinary Period: Stable Period: Growth Rate: (Sales) 5.00% 3.00% Growth Rate: (CF from Ops.) 5.00% 3.00% Growth Rate: (Capex) Assumed to remain at 9.0% of Sales Growth Rate: (Cash Dividend) Assumed to remain at 7.0% of Sales Equity Weight: 0.67 0.67 Debt Weight: 0.33 0.33 Beta: Assumptions: 0.96 0.96 Data Range: 12/1/07-12/1/08 Frequency: Daily Regression Index: BEL20 Risk Free Rate: (5 yr. T-Note) 2.30% 3.30% Risk Premimum: 8.00% 5.00% Cost of Equity: 9.94% 8.08% Cost of Debt: 10.59% 10.59% WACC: 10.15% 8.90% DCF Valuation as of January 1, 2008 Currency: Euro Extraordinary Period 1 2 3 2008 2009 2010 15,151.50 15,909.08 16,704.53 4,267.20 4,480.56 4,704.59 1,363.64 1,431.82 1,503.41 822.83 880.43 942.06 2,080.74 2,168.32 2,259.12 2,080.74 1,888.92 2,168.32 1,786.97 2,259.12 1,690.18 Stable Period 5 2012 18,065.95 5,088.01 1,625.94 1,078.56 2,383.51 33,314.90 35,698.41

0 2007 Sales 14,430.00 Cash Flow from Ops 4,064.00 Capital Expenditures 1,481.00 Cash Dividend 769.00 FCF 1,814.00 Terminal Value Total FCF PV of FCF Sum of PV of FCF 6,964.37 PV of Terminal Value 24,245.99 Firm Value 31,210.36 # of Shares Outstanding 605.80 Fair Value Per Share 51.52

4 2011 17,539.76 4,939.82 1,578.58 1,008.00 2,353.24 2,353.24 1,598.29

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Appendix 2 - InBev
Aussumptions: DCF, High Growth Extraordinary Period: Stable Period: Growth Rate: (Sales) 7.00% 3.50% Growth Rate: (CF from Ops.) 7.00% 3.50% Growth Rate: (Capex) Assumed to remain at 9.0% of Sales Growth Rate: (Cash Dividend) Assumed to remain at 7.0% of Sales Equity Weight: 0.67 0.67 Debt Weight: 0.33 0.33 Beta: Assumptions: 0.96 0.96 Data Range: 12/1/07-12/1/08 Frequency: Daily Regression Index: BEL20 Risk Free Rate: (5 yr. T-Note) 2.30% 3.30% Risk Premimum: 8.00% 5.00% Cost of Equity: 9.94% 8.08% Cost of Debt: 10.59% 10.59% WACC: 10.15% 8.90% DCF Valuation as of January 1, 2008 Currency: Euro Extraordinary Period 2 3 2009 2010 16,520.91 17,677.37 4,652.87 4,978.57 1,486.88 1,590.96 880.43 942.06 2,285.56 2,445.55 2,285.56 1,883.60 2,445.55 1,829.66 Stable Period 5 2012 19,576.80 5,513.52 1,761.91 1,078.56 2,673.05 40,169.03 42,842.08

Sales Cash Flow from Ops Capital Expenditures Cash Dividend FCF Terminal Value Total FCF PV of FCF Sum of PV of FCF PV of Terminal Value Firm Value # of Shares Outstanding Fair Value Per Share

0 2007 14,430.00 4,064.00 1,481.00 769.00 1,814.00

1 2008 15,440.10 4,348.48 1,389.61 822.83 2,136.04 2,136.04 1,939.13

4 2011 18,914.79 5,327.07 1,702.33 1,008.00 2,616.74 2,616.74 1,777.26

7,429.66 29,097.89 36,527.55 605.80 60.30

43

Appendix 3 - InBev
Aussumptions: DCF, Low Growth Extraordinary Period: Stable Period: Growth Rate: (Sales) 4.00% 2.00% Growth Rate: (CF from Ops.) 4.00% 2.00% Growth Rate: (Capex) Assumed to remain at 9.0% of Sales Growth Rate: (Cash Dividend) Assumed to remain at 7.0% of Sales Equity Weight: 0.67 0.67 Debt Weight: 0.33 0.33 Beta: Assumptions: 0.96 0.96 Data Range: 12/1/07-12/1/08 Frequency: Daily Regression Index: BEL20 Risk Free Rate: (5 yr. T-Note) 2.30% 3.30% Risk Premimum: 8.00% 5.00% Cost of Equity: 9.94% 8.08% Cost of Debt: 10.59% 10.59% WACC: 10.15% 8.90% DCF Valuation as of January 1, 2008 Currency: Euro Extraordinary Period 2 3 2009 2010 15,607.49 16,231.79 4,395.62 4,571.45 1,404.67 1,460.86 880.43 942.06 2,110.52 2,168.53 2,110.52 1,739.34 2,168.53 1,622.40 Stable Period 5 2012 17,218.68 4,896.93 1,549.68 1,078.56 2,268.69 27,821.34 30,090.03

Sales Cash Flow from Ops Capital Expenditures Cash Dividend FCF Terminal Value Total FCF PV of FCF Sum of PV of FCF PV of Terminal Value Firm Value # of Shares Outstanding Fair Value Per Share

0 2007 14,430.00 4,064.00 1,481.00 769.00 1,814.00

1 2008 15,007.20 4,226.56 1,350.65 822.83 2,053.08 2,053.08 1,863.82

4 2011 16,881.06 4,754.31 1,519.30 1,008.00 2,227.01 2,227.01 1,512.56

6,738.12 20,436.83 27,174.96 605.80 44.86

44

Appendix 4 BUD
Aussumptions: DCF, Medium Growth Extraordinary Period: Stable Period: Growth Rate: (Sales) 5.00% 2.50% Growth Rate: (CF from Ops.) 5.00% 2.50% Growth Rate: (Capex) Assumed to remain at 6.5% of Sales Growth Rate: (Cash Dividend) Assumed to remain at 5.6% of Sales Equity Weight: 0.26 0.26 Debt Weight: 0.74 0.74 Beta: Assumptions: 0.50 0.50 Data Range: 12/1/07-12/1/08 Frequency: Daily Regression Index: S&P 500 Risk Free Rate: (5 yr. T-Note) 2.30% 3.30% Risk Premimum: 8.00% 5.00% Cost of Equity: 6.29% 5.79% Cost of Debt: 5.30% 5.30% WACC: 6.03% 5.43% DCF Valuation as of April 1, 2008 Currency: US Dollar Spot Exchange Rate Dollars per Euro:

1.5842 Extraordinary Period 1 2 3 2008 2009 2010 $17,772.83 $18,661.47 $19,594.54 3,396.02 3,565.82 3,744.11 1,155.23 1,213.00 1,273.65 996.02 1,051.80 1,110.70 1,244.76 1,301.02 1,359.76 1,244.76 1,173.92 1,301.02 1,157.16 1,359.76 1,140.58 Stable Period 5 2012 $21,088.62 4,029.59 1,370.76 1,238.58 1,420.26 40,185.16 41,605.41

Sales Cash Flow from Ops Capital Expenditures Cash Dividend FCF Terminal Value Total FCF PV of FCF Sum of PV of FCF PV of Terminal Value Firm Value # of Shares Outstanding Fair Value Per Share Firm Value: Euro

0 2007 $16,926.50 3,234.30 865.90 943.20 1,425.20

4 2011 $20,574.27 3,931.31 1,337.33 1,172.90 1,421.09 1,421.09 1,124.18

4,595.84 32,912.79 37,508.63 721.3 $52.00 23,676.70

45

Appendix 5 BUD
Aussumptions: DCF, High Growth Extraordinary Period: Stable Period: Growth Rate: (Sales) 6.00% 3.00% Growth Rate: (CF from Ops.) 6.00% 3.00% Growth Rate: (Capex) Assumed to remain at 6.5% of Sales Growth Rate: (Cash Dividend) Assumed to remain at 5.6% of Sales Equity Weight: 0.26 0.26 Debt Weight: 0.74 0.74 Beta: Assumptions: 0.50 0.50 Data Range: 12/1/07-12/1/08 Frequency: Daily Regression Index: S&P 500 Risk Free Rate: (5 yr. T-Note) 2.30% 3.30% Risk Premimum: 8.00% 5.00% Cost of Equity: 6.29% 5.79% Cost of Debt: 5.30% 5.30% WACC: 6.03% 5.43% DCF Valuation as of April 1, 2008 Currency: US Dollar Spot Exchange Rate Dollars per Euro:

1.5842 Extraordinary Period 2 3 2009 2010 $19,018.62 $20,159.73 3,634.06 3,852.10 1,236.21 1,310.38 1,051.80 1,110.70 1,346.05 1,431.02 1,346.05 1,197.21 1,431.02 1,200.35 Stable Period 5 2012 $22,010.40 4,185.31 1,430.68 1,238.58 1,516.06 49,964.27 51,480.33

Sales Cash Flow from Ops Capital Expenditures Cash Dividend FCF Terminal Value Total FCF PV of FCF Sum of PV of FCF PV of Terminal Value Firm Value # of Shares Outstanding Fair Value Per Share Firm Value: Euro

0 2007 $16,926.50 3,234.30 865.90 943.20 1,425.20

1 2008 $17,942.09 3,428.36 1,166.24 996.02 1,266.10 1,266.10 1,194.05

4 2011 $21,369.32 4,083.23 1,389.01 1,172.90 1,521.33 1,521.33 1,203.48

4,795.09 40,724.54 45,519.62 721.3 $63.11 28,733.51

46

Appendix 6 BUD
Aussumptions: DCF, Low Growth Extraordinary Period: Stable Period: Growth Rate: (Sales) 4.00% 2.00% Growth Rate: (CF from Ops.) 4.00% 2.00% Growth Rate: (Capex) Assumed to remain at 6.5% of Sales Growth Rate: (Cash Dividend) Assumed to remain at 5.6% of Sales Equity Weight: 0.26 0.26 Debt Weight: 0.74 0.74 Beta: Assumptions: 0.50 0.50 Data Range: 12/1/07-12/1/08 Frequency: Daily Regression Index: S&P 500 Risk Free Rate: (5 yr. T-Note) 2.30% 3.30% Risk Premimum: 8.00% 5.00% Cost of Equity: 6.29% 5.79% Cost of Debt: 5.30% 5.30% WACC: 6.03% 5.43% DCF Valuation as of April 1, 2008 Currency: US Dollar Spot Exchange Rate Dollars per Euro:

1.5842 Extraordinary Period 2 3 2009 2010 $18,307.70 $19,040.01 3,498.22 3,638.15 1,190.00 1,237.60 1,051.80 1,110.70 1,256.42 1,289.85 1,256.42 1,117.49 1,289.85 1,081.93 Stable Period 5 2012 $20,197.64 3,878.27 1,312.85 1,238.58 1,326.84 32,889.15 34,215.99

Sales Cash Flow from Ops Capital Expenditures Cash Dividend FCF Terminal Value Total FCF PV of FCF Sum of PV of FCF PV of Terminal Value Firm Value # of Shares Outstanding Fair Value Per Share Firm Value: Euro

0 2007 $16,926.50 3,234.30 865.90 943.20 1,425.20

1 2008 $17,603.56 3,363.67 1,144.23 996.02 1,223.42 1,223.42 1,153.80

4 2011 $19,801.61 3,783.67 1,287.10 1,172.90 1,323.67 1,323.67 1,047.12

4,400.34 27,067.24 31,467.57 721.3 $43.63 19,863.39

47

Appendix 7 Multiple Valuation

Report as of: 14-Apr-08 Reuters Global Fundamentals / I/B/E/S Currency: U.S. Dollar InBev AnheuserBusch Cos. Inc. BUD 12/2007 SABMiller PLC SAB-GB 09/2007 Scottish & Newcastle PLC SCTN-GB 06/2007 Heineken N.V. HEIA-NL 12/2007 Kirin Diageo PLC Holdings Co. Ltd. 2503-JP DGE-GB 12/2007 12/2007

Averages for 21 competitors Summary Statistics Avg Median Current Price 52 Week High 52 Week Low Beta Market Value Enterprise Value Sales Assets LTM Price to Earnings NTM Price to Earnings Price to Book Book Value per Share Price to Sales Price to Cash Flow Enterprise to Sales Dividend Yield Sales Growth Gross Profit Growth EPS Growth Assets Growth 25.90 29.80 19.39 0.80 15,773.2 16,822.3 8,483.3 10,980.0 24.8 17.7 3.0 8.46 1.6 18.4 2.0 1.6 + 11.3 + 10.6 + 32.6 + 11.8 19.39 21.21 13.79 0.72 9,818.3 12,000.9 5,718.7 9,665.3 20.9 16.3 2.4 5.57 1.6 12.4 1.9 1.2 + 13.7 + 7.8 + 18.4 + 9.7

INB-BE 12/2007

93.31 99.00 67.27 1.31 56,427.4 21,097.4 16.5 16.6 2.5 4.1 -

48.36 55.19 45.55 0.55 34,544.2 43,401.3 16,685.7 17,155.0 17.3 15.5 11.1 4.37 2.1 12.0 2.6 2.6 + 6.2 + 5.4 + 10.4 + 4.7

20.94 31.46 19.91 1.23 33,148.2 40,684.2 20,057.0 30,700.0 17.4 13.8 2.1 9.85 1.6 12.0 2.0 2.5 + 14.0 + 14.4 + 12.6

15.63 16.40 11.14 0.40 14,854.7 18,863.8 6,635.0 14,112.7 26.3 19.6 2.3 6.78 2.5 23.9 3.2 0.9 + 8.7 - 8.9 + 8.3 + 7.2

59.37 70.93 49.77 0.67 29,043.5 32,549.5 18,369.2 18,959.9 22.8 14.0 3.4 16.15 1.5 10.6 1.7 1.9 + 14.1 + 0.6 - 26.1 + 10.6

19.39 19.70 12.17 0.53 18,508.2 23,872.6 16,122.9 22,106.8 28.1 17.7 1.8 9.89 1.0 16.3 1.4 1.1 + 15.3 + 14.1 + 33.1 + 34.1

20.68 23.46 17.88 0.72 52,995.4 64,646.4 15,419.2 30,231.2 19.2 15.7 7.0 2.97 3.5 18.8 4.2 3.2 + 7.6 + 6.9 - 6.2 + 7.2

48

Appendix 8 - Synergies
Revenue Enhancement Synergy Valuation, Fair Estimate Assumptions: Revenue Enhancement Growth Rate; yrs. 1,2 and 3 Revenue Enhancement Growth Rate; yr. 4 Revenue Enhancement Growth Rate; yr. 5 on Reqd. Reinvestment to Sustain Enhanced Growth (as % of Revenue) Operating Costs (as % of Revenue) Discount Rate:

20.00% 10.00% 3.00% 8.00% 50.00% 15.00%

0 Revenue Enhancement Due to Improved: Additional Distribution

1 2008

Year 2 2009

3 2010

4 2011

Terminal

300.00

360.00

432.00

475.20

489.46

Total Revenue Due to Enhanced Synergies: Operating Costs EBITDA Dep. and Amort. (3% of Sales) EBIT Taxes (@ 40%) Net Income Reqd. Reinvestment FCF PV of FCF Terminal Value Total FCF's Sum of PV of FCF PV of Terminal Value Total Value of Revenue Enhancement Synergies Investment Required to realize Enhanced Revenue Net Present Value of Enhanced Revenue

300.00 150.00 150.00 9.00 141.00 56.40 84.60 24.00 60.60 52.70 60.60 219.94 527.61 747.55 300.00 447.55

360.00 180.00 180.00 10.80 169.20 67.68 101.52 28.80 72.72 54.99 72.72

432.00 216.00 216.00 12.96 203.04 81.22 121.82 34.56 87.26 57.38 87.26

475.20 237.60 237.60 14.26 223.34 89.34 134.01 38.02 95.99 54.88 95.99

489.46 244.73 244.73 14.68 230.04 92.02 138.03 39.16 98.87 823.92 922.79

49

Appendix 9 Cost Synergies

Cost Savings Synergy Valuation, Fair Estimate Assumptions: Estimated Cost Savings; yr. 1 Estimated Cost Savings; yr. 2 Estimated Growth in Cost Savings; yrs. 3 and On Reqd. Reinvestment to Sustain Enhanced Cost Savings (as % of Revenue) Discount Rate: Conversion Rate: Dollars Per Euro

15.00% 8.00% 4.00% 5.00% 15.00% 1.5842

1 2008

Year 2 2009

3 2010

4 2011

Terminal

Estimated Cost Savings Due To: Reduction of COGS: $10,991.50 Direct Labor 2198.30 329.75 Optimizing Production 1099.15 164.87 Economies of Scale 1648.73 247.31 Reduction of SG&A: $3,022.70 Shipping Costs 151.14 22.67 Marketing Costs 453.41 68.01 Corporate Overhead 604.54 90.68 Reduction of WC: $217.80 32.67 Total Cost Savings 955.96 Taxes (@ 40%) 382.38 After Tax Cost Savings 573.57 Reqd. Reinvestment to Maintain Cost Savings FCF 573.57 Terminal Value Total FCF's 573.57 PV of FCF 498.76 Sum of PV of FCF 1,701.22 PV of Terminal Value 3,685.23 Total Value of Cost Saving Synergies 5,386.45 Investment Required to realize Enhanced Revenue 500.00 Net Present Value of Cost Saving Synergies $4,886.45 NPV of Cost Synergies: Euro 3,084.49

356.12 178.06 267.09 24.48 73.45 97.94 35.28 1,032.43 412.97 619.46 25.81 593.65 593.65 448.88

370.37 185.18 277.78 25.46 76.39 101.85 36.69 1,073.73 429.49 644.24 32.21 612.03 612.03 402.42

385.18 192.59 288.89 26.48 79.45 105.93 38.16 1,116.68 446.67 670.01 55.83 614.17 614.17 351.16

400.59 200.30 300.44 27.54 82.62 110.16 39.69 1,161.35 464.54 696.81 58.07 638.74 5,806.74 6,445.49

50

Appendix 10 Fair Value Merged Companies

"Fair" Value Merged Co. = Market Value InBev + Market Value AB + Synergies - Cash Market Value InBev Market Value AB Synergies (Fair) Value InBev/AB Merged 36,277 21,531 3,532 61,340.41

Appendix 11 Preimum Offers

51

Initial Premium Offer

Premimum=Price Pd. for Target - Mkt. Value Target Offer Price Market Value of AB Premium/Share Firm Value Premium Firm Value Premium Premium Percentage $52.96 $47.29 $5.67 $4,093.23 2,583.79 12.00%

Deal Structure
Offer: Purchase 100% of AB in a Stock-for-Stock Transaction Current Mkt. Value: AB 21,531 Prem/Share * # of Shares $4,093.23 Prem/Share in Euro 2,583.79 Prem % of Tot. Synergies 73.15% Offer Price/Share $52.96 Total Offer in Dollars @ 100% $38,203.51 Total Offer in Euro @ 100% 24,115.33 # of InBev Treas. Shares Req. @ 59.88/Share 402.7

EPS Analysis
EPS Combined Firm = Net Income Combined / # of Shares Combined Firm Net Income, InBev 2,198.00 Net Income, AB 1,331.08 Net Income Combined 3,529.08 # of Shares Combined 830.66 EPS Combined Firm 4.25 Accretion/Dilution of InBevStock = EPS Combined Firm - EPS InBev Pre-Merger EPS Combined Firm EPS InBev Pre-Merger Accretion of InBev Stock 4.25 3.42 0.83

Appendix 12 Walk Away Premium Offer

52

Walk Away Premium Offer

Premimum=Price Pd. for Target - Mkt. Value Target Walk Away Price Market Value of AB Premium/Share Firm Value Premium Firm Value Premium Premium Percentage $54.38 $47.29 $7.09 $5,116.54 3,229.73 15.00%

Deal Structure Walk Away

Offer: Purchase 100% of AB in a Stock-for-Stock Transaction Current Mkt. Value: AB 21,531 Prem/Share * # of Shares $5,116.54 Prem/Share in Euro 3,229.73 Prem % of Tot. Synergies 91.44% Offer Price/Share $54.38 Total Offer in Dollars @ 100% $39,226.82 Total Offer in Euro @ 100% 24,761.28 # of InBev Treas. Shares Req. @ 59.88/Share 413.5

EPS Analysis Walk Away

EPS Combined Firm = Net Income Combined / # of Shares Combined Firm Net Income, InBev 2,198.00 Net Income, AB 1,331.08 Net Income Combined 3,529.08 # of Shares Combined 842.86 EPS Combined Firm 4.19 Accretion/Dilution of InBevStock = EPS Combined Firm - EPS InBev Pre-Merger EPS Combined Firm EPS InBev Pre-Merger Accretion of InBev Stock 4.19 3.42 0.77

Appendix 13 Impact of Collar, At a increase of 2% in the exchange rate

53

Assumes Dollars Per Euro of:

1.6159

Offer: Purchase 100% of AB in a Stock-for-Stock Transaction Current Mkt. Value: AB 21,109 Prem/Share * # of Shares $5,116.54 Prem/Share in Euro 3,166.37 Prem % of Tot. Synergies 89.65% Offer Price/Share $54.38 Total Offer in Dollars @ 100% $39,226.82 Total Offer in Euro @ 100% 24,275.52 # of InBev Treas. Shares Req. @ 59.88/Share 405.4 EPS Combined Firm = Net Income Combined / # of Shares Combined Firm Net Income, InBev 2,198.00 Net Income, AB 1,304.97 Net Income Combined 3,502.97 # of Shares Combined 833.65 EPS Combined Firm 4.20 Accretion/Dilution of InBevStock = EPS Combined Firm - EPS InBev Pre-Merger EPS Combined Firm EPS InBev Pre-Merger Accretion of InBev Stock 4.20 3.42 0.78

Appendix 14 - At a decrease of 2% in the exchange rate

54

Assumes Dollars Per Euro of:

1.5525

Offer: Purchase 100% of AB in a Stock-for-Stock Transaction Current Mkt. Value: AB 21,971 Prem/Share * # of Shares $5,116.54 Prem/Share in Euro 3,295.68 Prem % of Tot. Synergies 93.31% Offer Price/Share $54.38 Total Offer in Dollars @ 100% $39,226.82 Total Offer in Euro @ 100% 25,266.87 # of InBev Treas. Shares Req. @ 59.88/Share 422.0 EPS Combined Firm = Net Income Combined / # of Shares Combined Firm Net Income, InBev 2,198.00 Net Income, AB 1,358.26 Net Income Combined 3,556.26 # of Shares Combined 852.64 EPS Combined Firm 4.17 Accretion/Dilution of InBevStock = EPS Combined Firm - EPS InBev Pre-Merger EPS Combined Firm EPS InBev Pre-Merger Accretion of InBev Stock 4.17 3.42 0.75

Appendix 15 Premium Justification

55

Scottish & Newcastle PLC

SCTN-GB 0783969 London Common stock Target Ownership Public Price/ Share 15.87 Premium 1 Day 4%

Date Created: 28-Apr-2008

Buyer Name Sunrise Acquisitions Ltd.

Seller Name Scottish & Newcastle PLC

Unit Name -

Premium 5 Day 5%

Premium 30 Day 8%

FactSet Mergerstat - Premium Report

Molson Coors Brewing Co. (Cl B)

TAP 60871R209 B067BM3 NYSE Common stock Target Ownership Public Price/ Share 25.76 Premium 1 Day -2% Premium 5 Day 3% Premium 30 Day 6%

Buyer Name Adolph Coors Co.

Seller Name Molson, Inc.

Unit Name -

FactSet Mergerstat - Premium Report

Anheuser-Busch Cos. Inc.

BUD 035229103 2033004 NYSE Common stock Target Ownership Public Public Public Price/ Share 4.73 0.72 0.72 Premium 1 Day -5% 10% 9% Premium 5 Day -1% 12% 12% Premium 30 Day -3% 63% 63%

Buyer Name Seller Name Cia Cervecerias Unidas SA /Private Group/ Anheuser-Busch Cos., Inc. Anheuser-Busch Cos., Inc. Harbin Brewery Group Ltd. Anheuser-Busch Cos., Inc. Harbin Brewery Group Ltd.

Unit Name United Breweries Co., Inc. -

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56

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Bloomberg.com, Nov 9, 2007

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Street Looking for Improved performance. www.brewlog.com

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consolidation
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Anheuser, Inbev (Update 1) Oct 10 2007 http://www.bloomberg.com/apps/news? pid=20601087&sid=aUdtEYd9iKZY&refer=home

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31. European Commission website Competition,

http://ec.europa.eu/comm/competition/mergers/legislation/legislation.html#
32. Brown, Heidi. The Son Finally Rises. Forbes Asia, 3/12/2007, vol 3, issue 4

p30 32. http://web.ebscohost.com.ezp.bentley.edu/bsi/detail? vid=5&hid=6&sid=302caf8d-8684-4063-8968-c18b52dadbb6%40sessionmgr9

33. Meller, Paul. Belgian Brewer Acquires a Taste for Brazilian Frugality.

http://www.nytimes.com/2005/09/27/business/worldbusiness/27beer.html? _r=1&oref=slogin

59