Str ate gic Re por t Da mila re Ab dula i Za ina b Olo wo la g - - PowerPoint PPT Presentation

Str ate gic Re por t

Da mila re Ab dula i Za ina b Olo wo la g b a Ove rc o me r F a sa n

PRIORITY

SCENARIO IMPACT URGENCY FINANCIAL EFFECT ETHICAL EFFECT RISK INVOLVED

STAKEHOLDERS’ IMPLICATION

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Integration, Synergies and Execution Risk

2

Deal Funding Strategy and Group Financial Performance

3

Africa Direct Entry via Nigeria

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B2B and Downstream Supply chain strategy

Key: Very high- High- Moderate- Low-

AB INBEV ISSUES PRIORITISATION

SWOT ANALYSIS AND PESTEL MODEL

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Syne rgie s

• Co st syne rg ie s: US$2.45b / a nnum
• Re ve nue Syne rg ie s: US$ 210m/ a nnum

Ac hie ving the e xpe c te d syne rgie s within four ye ars

• SPI

= 0.84

• T

SPI =1.16

Ove rpric e d SAB Mille rs Ac quisition de al

• E

xc e ss o f $11.3b

• Pre se nt va lue o f syne rg ie s- $14.19b

F

inanc ial Re porting Standards applic able :

• Disc lo se the a c q uisitio n- I

AS10

• Disc lo se the c o st sa ving s o f $448m- I

AS37

Re c omme ndations:

1.Ac q uire SAB Mille r in o rde r to re a lise the syne rg ie s 2.AB I nBe v sho uld inc re a se the ir c o st e ffic ie nc ie s b y 16%

PRIORITY 1 :- INTREGRATION, SYNERGIES AND EXECUTION RISK

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PRIORITY 2 :- DEAL FUNDING STRATEGY AND GROUP FINANCIAL PERFORMANCE

A.

• The best mix of Equity and Debt for financing the

Purchase Consideration

• Issue

670,880,270 shares at US$111 per share = US$74,467.71m

• Debt = US$31,032.285m

B.

• Assessing the likelihood of Insolvency
• Altman Z-score of 2.25 (Likelihood of failure)

C.

• Shar

e holde r s’ We alth Maximisation

• E

c onomic Value Adde d:

• 2014- US$1003.52m
• 2013- US6804.12m
• NOPATr

e duc e d by 31.9%

Re c omme ndations

• 1. Ra ise 85% o f the purc ha se

c o nside ra tio n b y issuing e q uity a nd 15% b y issuing de b t se c uritie s.

• 2. Do no t use the pre se nt c a sh

a s pa rt o f purc ha se c o nside ra tio n

• 3. I

mpro ve o n liq uidity po sitio n.

• 4. I

mpro ve o n Ope ra ting a c tivitie s.

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Cr

ite r ion

Option1:- Inve st in Nig e ria Option 2:- Do not inve st in Nig e ria

CASHF L OWS

NPV o f $2876.45 millio n Sunk c o st o f $100.5 millio n OUR RE COMME NDAT I ONS:

• 1. AB I

nBe v sho uld ma ke a fo re ig n dire c t inve stme nt in Nig e ria if SAB Mille r a c q uisitio n de a l fa il to c lo se .

• 2. T

he c o mpa ny sho uld upho ld its thre e c o re pilla rs (A g re e ne r wo rld, a c le a ne r wo rld a nd a he a lthie r wo rld).

Be ne fits o f I nve sting in Nig e ria :

 A Ne t Pre se nt Va lue o f $2.876b . Oppo rtunity to b e the ma rke t le a de r in Nig e ria .

PRIORITY 3 :- AFRICAN DIRECT ENTRY VIA NIGERIA

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F

• c us: Re duc tio n o f pro spe c tive Ne wc o c usto me rs’ Ba rg a ining Po we r

Ma jo r Po ssib le stra te g ic a c tio ns to c o nside r:

 Whic h supe rma rke ts to se ll to b a se d o n fo re c a st pro fita b ility.  Whe the r to ve nture into dire c t re ta iling to c usto me rs.

Customers’ Profitability Analysis

Porters Five Forces Model

PRIORITY 4 :- B2B AND DOWNSTREAM SUPPLY CHAIN STRATEGY IN SOUTHERN AFRICA

6.37 2.6 10.34 80.69

Net Cash Inflows (%)

Shoprite Pickn'Pay Makro Direct Retailing

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RE COMME NDAT IONS:

PRIORITY 4 :- B2B AND DOWNSTREAM SUPPLY CHAIN STRATEGY IN SOUTHERN AFRICA

1. Pre fe re nc e sho uld b e g ive n to B2C ma rke ting stra te g y. 1. Sto p se lling dire c tly to Pic k a nd Pa y Supe rma rke t. 1. Stra te g ic a dvic e sho uld b e g ive n to Sho prite a nd Ma kro o n ho w to re duc e c o st g e ne ra ting a c tivitie s. A ve ry g o o d Ma na g e me nt I nfo rma tio n Syste m sho uld b e inc o rpo ra te d to re duc e c o st o f c o st g e ne ra ting a c tivitie s

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ETHICAL ISSUE 1 :- ANTI-COMPETITIVE ISSUES

Anti- Compe titive Issue s

T he Ame ric a n Ac c o unting Asso c ia tio n mo de l, pro viding a lo g ic a l se ve n-ste p pro c e ss fo r de c isio n ma king , ha s b e e n a do pte d to so lving the e thic a l issue s. RE COMME NDAT I ONS

• 1. T

he c o mb ine d c o mpa ny sho uld c o o pe ra te with the pa yme nt o f US$5millio n a s re q uire d b y the So uth Afric a n g o ve rnme nt.

• 2. Ne wc o sho uld ha ve its se c o nda ry listing o n the Jo ha nne sb urg Sto c k E

xc ha ng e .

• 3. I

mple me nt the Stra te g ic He a d Co unt Re duc tio n a nd Re tre nc hme nt Pro g ra mme (SHCRRP).

US$5 million imposition by the South Afr ic an gove r nme nt on Ne wc o

T ra de union c onc e rns on downsizing

SAB Mille r ’s r e te ntion on the JSE 8

ETHICAL ISSUE 2 :- ENVIRONMENTAL HAZARD IN CHINA

De o nto lo g ic al Appro ac h(Ac tio ns judg e d b y se nse o f duty)

 Ca re le ss dispo sa l o f Building wa ste in a ne a rb y rive r is

inc o nsiste nt with the c a te g o ric a l impe ra tive . T e le o lo g ic al Appro ac h (Ac tio ns judg e d b y c o nse q ue nc e )

 Ca re le ss disc a rding o f b uilding wa ste po se s a ha rmful

situa tio n to wildlife a nd e q ua lly po llute s the wa te r

RE COMME NDAT IONS

• 1. T

a ke the a ppro pria te me a sure s to b ring this a c tio n to a ha lt.

• 2. E

nsure tha t the b uilding ’ s wa ste a re sub se q ue ntly dispo se d pro pe rly.

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CONCL USION

AB InBev should acquire SAB Miller. Finance 85% of the acquisition transaction by raising equity shares and 15% through debt. Invest in Nigeria if only SAB Miller acquisition fails. Preference should be given to B2C marketing strategy. Take adequate actions to discontinue the inappropriate waste disposal in China.

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