Brewing industry consolidation due to M&As and its effect on acquirer shareholder value

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Brewing industry consolidation due to

M&As and its effect on acquirer

shareholder value

Martijn P. Ophof

10265910

Economics & Finance

Supervisor: Mr. R.C. (Rob) Sperna Weiland

July 2016

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Martijn P. Ophof (University of Amsterdam) 2 Statement of Originality

This document is written by Student Martijn Ophof who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Martijn P. Ophof (University of Amsterdam) 3 Contents

1. Introduction ...4

2. Literature review:...6

2.1 Mergers and acquisitions ...6

2.2 Measure M&A success ...9

2.3 Brewing industry overview ...11

2.4 Trend in brewing industry ...13

2.5 Big Four: M&A part of strategy in brewing industry ...14

3. Research question and hypothesis...19

4. Data and methodology ...21

4.1 Sample Data ...21 4.2 Methodology ...21 5. Results ...27 5.1 AB-InBev ...27 5.2 SAB Miller ...29 5.3 Heineken ...31 5.4 Carlsberg ...33 5.5 Summary results...34

6. Conclusion and discussion ...35

7. Appendix...37

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Martijn P. Ophof (University of Amsterdam) 4

1. Introduction

Last year, world’s largest brewer, AB-InBev announced to acquire SAB Miller, world’s second largest brewer, for 107b $. Although the acquisition has to be approved by competition authorities, this could result in one global brewer producing a third of total beer volume produced worldwide (Buckley & Mulier, 2015). More than sixty years ago the situation was different, back then four largest brewers together accounted for 22% of global market share. Furthermore, the market was marked by small local brewers; nowadays the industry is marked by fewer larger brewers. This consolidation is due to globalization but also to industry-specific characteristics which led to increased merger & acquisition (M&A) activity over the past years. Decreased sales in developed countries in recent years, mostly West-Europe, resulted in quest among large brewers to find targets in profitable emerging countries.

Existing evidence has extensively examined the overall wealth effects to acquirer and target shareholders following from M&A announcements. Short-term studies found significant positive returns on stock for target shareholders (Martynova & Renneboog, 2006; Bruner, 2002; Eckbo, 2008). Whereas acquirer shareholders earn an overall abnormal return of zero percent (Bruner, 2002). However, when industries are investigated individually the acquirer abnormal returns can deviate from zero and the capital market will value synergies potential or high acquisition premiums. The increased number of M&As within the brewing industry have attracted the attention of Ebneth & Theuvsen (2007) and Mehta & Schiereck (2012), who found no overall significant return and significant positive returns, respectively. Currently, the beer market is dominated by AB-InBev, SAB-Miller, Heineken and Carlsberg (the big four), each with another M&A strategy and financial exposition. This paper focuses on the short-term returns of the big four for the past fifteen years and updates existing short-term evidence by analyzing most recent M&As within the brewing industry.

To examine the short-term wealth effect of M&A announcements of the big four, we will use the event-study methodology described by (MacKinlay, 1997). Assuming efficient market hypothesis, this methodology measures the response of M&A announcements on acquirers stock. The event study is applied to 52 M&A announcements of the Big Four from 2000 – 2016.

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Martijn P. Ophof (University of Amsterdam) 5 We will start with general theories about M&As and ways to measure M&A success. To understand the brewing industry, a brief history of the brewing industry is provided. After that, we will zoom in at the M&As of the big four over the past fifteen years. The results show different returns for the big four brewers; this might be due to different M&A strategies.

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2. Literature review:

2.1 Mergers and acquisitions

Mergers and acquisitions (M&A) are part of corporate finance and point out the market for corporate control. Both terms are used as synonyms in literature, but there is a slight difference between them. In an M&A transaction, the buyer is called the “acquirer” or “bidder”, the firm that is acquired is called the “target” firm. Either a firm, group or individual can acquire a target firm, or the firm can merge with the acquirer firm. In the case of a merger, the acquirer and target agree to live on as one new firm instead of two different entities separately owned. In the event of a full acquisition, the target firm will be “swallowed” by the acquirer and go on as one firm. In both cases, the transaction is the same because the acquirer needs to buy the shares of the target. In this study mergers and acquisitions are treated the same for clarity. An acquisition does not have to involve the purchase of the full hundred percent shares. Also minority stakes appear frequently. M&As within the same industry are called horizontal mergers, whereas M&As of firms producing different goods or services for a specific finished product are labeled as vertical mergers. Finally, conglomerate mergers come from M&As between unrelated industries (Berk & DeMarzo, 2011). The two most general methods of payment to buy the stock or existing assets of the target are cash and a stock swap (share offer of the acquirer or newly formed firm). A combination of cash and shares is used as well. The price that an acquirer will pay to take over a target firm equals the value of the target before the takeover plus a premium, called the acquisition premium.

Mergers and acquisitions mostly occur during merger waves, periods where there is a significantly higher level of takeovers. The same economic activities that drive expansions most likely also drive peaks in merger activity (Berk & DeMarzo, 2011). Therefore, merger activity during a financial crisis is lower in comparison with periods of economic expansions. Due to the improving economy of the last years, the level of mergers and acquisitions is increasing significantly since the beginning of the Financial Crisis in 2008. For instance, the level of M&As in the Benelux is at the highest level at the moment since five years (Maarsen H., de Groot, G., 2015).

The most important motives for M&As according to a survey of 75 US firms’ CFOs from 1990-2001 are: take advantage of synergy (37,3%), diversify risk (29,3%), achieve a particular

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Martijn P. Ophof (University of Amsterdam) 7 organizational form as part of an ongoing restructuring program (10,7). The other motives are: acquire a company below its replacements cost, use of excess cash, reduce tax on combined firm. (Muhkerjee, Kiymaz, & Baker, 2004).

On the announcement day of a possible M&A, the information about the initial takeover becomes public to investors. The M&A announcement reveals information about the expectations of future profit and dividend streams. As a result, stock prices will change, this is in line with the efficient market hypothesis, that the stock price will reflect all available information to the market (Ebneth & Theuvsen, 2007). M&As can, therefore, lead to an abnormal return on stock for shareholders. According to Trautwein (1990), who investigated several M&A motives and merger prescriptions, three theories for M&A purposes should enlarge the acquirer shareholder value:

1. Efficiency theory: mergers are planned to achieve three types of synergies. Lower cost of capital as a result of financial synergies. Investing in unrelated businesses, lowers systematic risk and increasing firm’s size may give access to cheaper capital. Second, operational synergies due to combining operations of separate business units and from knowledge migration. Last, managerial synergies, arise when acquirer managers can better plan and monitor to the target managers, this benefits target’s performance.

2. Valuation theory: acquirer firm managers, who have exclusive information about target’s value, plan mergers. This information about possible merger advantages is not available to the stock market at an earlier stage.

3. Monopoly theory: mergers are executed to achieve market power. Wealth transfers from customers to bidder’s shareholders. Large firms use their market power to push up prices. If market power increases, the level of competitiveness is cut down. Profits gained from the increased market power can be used to increase market share in other markets.

Besides these three theories, there are two other M&A motives, more based on direct investigation and indirect interpretation of merger outcomes (Trautwein, 1990). Characteristic for these other motives is that they are not giving immediate return to acquirer shareholders and are even able to decrease shareholders value:

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Martijn P. Ophof (University of Amsterdam) 8 4. Empire building theory: acquirer managers who maximize their utility rather than their shareholders’ value carry out mergers. Manager’s incentives are related to firms’ performance and therefore willing to take excessive risks. The consequence; ambition to expand the company with a high-risk profile instead of maximization the shareholders’ value. Managers sometimes get shares to avert this manager's utility maximization partly.

5. Process theory: lies upon the fact that M&As as strategic decisions did not take place on rational choices but as outcomes of processes. First, individuals are not capable of possessing all information during a decision-making process. Second, organizational routines and the bulk of participants and their restricted rationality make a perfect solution to problems difficult. Therefore, wrong decisions can be made.

Apart from the M&A motives there can be made a distinction in the type of M&As. Horizontal takeovers, typically are friendly takeovers, also known as strategic takeovers. On the other hand, hostile takeovers, often marked with cash payments and conglomerate takeovers in an unrelated business, are financial takeovers. In the research of (Healy, Palepu, & Ruback, 1997), the two gross types of takeovers are compared on performance. In the next part, we will briefly discuss their findings and the tools to measure M&A success.

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Martijn P. Ophof (University of Amsterdam) 9 2.2 Measure M&A success

There are four main methods to gauge the effect of M&As: event studies, accounting-based measures, survey data and case studies. An event study estimates the effect of an event on the value of a firm using financial data stock data over a particular time window; in this case, the events are M&A announcements (MacKinlay, 1997). Bruner (2002) summarized 130 studies that investigated the pay-off of M&As. He has looked at all four methodologies, according to his conclusion the strengths of the event studies are a direct measure of value created for investors and a forward-looking measure given. Ebneth & Theuvsen (2007) also value event studies because data is publicly available and abnormal return can be calculated independently for a wide range of industries. Some analyst criticizes the event study methodology because the required assumptions, which will be discussed in the methodology part later on. We can make a distinction between short-term and long-term studies for measuring M&A success.

Long-term studies mainly use accounting-based measures to investigate the long-term success of M&As. Healy, Palepu, & Ruback (1997) used this method; in their opinion, the actual benefits of takeovers are represented the best by post-takeover performance whereas the stock returns on M&A announcements better represent the investors’ expectations about potential gains arising from the takeover. In the sample of the fifty biggest USA industrial takeovers from 1979 to 1984, post-takeover cash flows, adjusted for overall industry performance, were analyzed comparing strategic and financial takeovers. An essential element is the acquisition premium which is paid by the acquirer firm. Takeovers did pay off if the acquisition premium was ignored. However with the acquisition premium taken into account, the overall result differs among the strategic and financial takeovers. The premiums paid with strategic takeovers were much lower than by financial takeovers. The main reason for this is the accuracy in valuing the target firm. Strategic takeovers were able to create more synergies and pay a lower acquisition premium, resulting in an overall positive gain for acquirers on the accounting-based measure.

Most event studies focus on the short-term wealth effect of M&A announcements (Bruner, 2002). Event studies make use of the abnormal return which is the difference between the actual return minus the predicted normal return on a stock if the M&A announcement did not take place. The short-term value creation on a stock as a result of an

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Martijn P. Ophof (University of Amsterdam) 10 M&A announcement is mostly applied to the target shareholders because these shareholders benefit from the premium paid by the acquirer (Martynova & Renneboog, 2006). Their study investigated the abnormal return of 2419 European M&As around announcement dates applying an event study. Martynova & Renneboog (2006) found a target shareholders return of +9% compared to an abnormal return of +0, 5% for the acquirer shareholders around the announcement date. Research based on all US deals from 1980 to 2005, reported by (Eckbo, 2008), came to an announcement stock price reaction of +15% for target and +1% for acquirer shareholders to the announcement date. Also, the method of payment has an effect on the acquirer abnormal returns. Full shares payments experience a negative abnormal return to acquirer shareholders, full cash payments experience “normal” rates of return (Travlos, 1987). He also concludes that the overall abnormal return close to zero reflects the competitive market for takeovers. So acquirers pay a fair price for their targets and expected synergies. Martynova & Renneboog (2006) state that the method of payment is a way to signal investors. Cash payments signal that the acquirer firm is willing to pay off target shareholder so that they cannot earn future profits arising from the synergies.

Bruner (2002) reviewed 114 various M&A event studies from 1971 to 2001. The mainstream of the summarized studies concludes that target shareholders earn a significant positive short-term return and that bidders earn a return of zero percent. The combined abnormal return of target and acquirer is positive; therefore, M&A does pay off.

However, if industries are investigated separately, studies remarked that there could be a short-term return for acquirer shareholders that is different from zero, in some cases even a significant positive return because of extraordinary synergies. Beitel, Schiereck, & Wahrenburg (2004) report negative return for 98 large M&As in the European banking sector from 1985 to 2000 while (Choi & Russell, 2004) find a positive return on an analysis of 171 construction M&As, however not at a significant level. Ebneth & Theuvsen (2007) investigated 31 M&As in the brewing industry from 2000 to 2005 and found no overall significant positive return. Whereas Mehta & Schiereck (2012) found a significant positive acquirer return for the brewing industry between 1998 and 2010 and highlight the importance of industry specific M&A studies. According to them, the stock market values the M&As as right deals and remark a possible extraordinary synergy arising from the mergers in the brewing industry.

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Martijn P. Ophof (University of Amsterdam) 11 Brewing industry specific studies in recent years are limited, while takeover activity increased over the last years and the biggest brewers in the world are stil becoming bigger and bigger. Industry-specific research remains meaningful research. In the next part, we will take a closer look at the brewing industry, industry characteristics and the M&A activities from recent years which have not been investigated yet.

2.3 Brewing industry overview

The internationalization/globalization of economic activities and technological innovation all along the third and fourth quarter of the 20th century encouraged the M&A activity on the general global takeover market (Keithahn, 1978). The brewing industry also underwent this increase in M&A activity.

Decades ago the brewing industry was characterized by a large number of local brewers with a small market share that fulfilled the regional demand in their country. The industry was fragmented, but over the past decade, the brewing industry consolidated heavily. The last years the big four: AB-InBev, SABMiller, Heineken and Carlsberg mainly controlled the brewing industry. These breweries together had a global market share of 42,5% in 2011 (Howard, 2014). Some of this market share increase was the result of sales growth of the firms, but most part is a result of M&As (Howard, 2014). The consolidation that has taken place between 1998 and 2004 is illustrated in Figure 1.

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Figure 1: Top ten global brewers (1998 vs. 2004). Source: Ebneth and Theuvsen (2007)

The globalization of economic activities, that enhanced M&As, was a general trend in many industries. However, the brewing industry has lagged behind according to Ebneth & Theuvsen (2007). If we look back at the 19th and 20th century, we can address some industry and product characteristics that have had a negative impact on the possibility to expand former regional markets.

First, beer is a product that just consists of water, malted grains, hops and yeast as raw materials. The brewing process is also relatively simple; therefore, product innovation to gain a market advantage was hard for larger brewing firms in the second half of the 19th century (Howard, 2014). Further, the transportation and storage of beer are quite costly because of the heavy weight (Scherer, 1975). Also, the durability from the beer made by early brewers was awful compared to other consumer foods. Beer spoiled rapidly, making it impossible to transport the goods over a long distance. At the beginning of the 1900s, technological developments concerning durability and distribution have taken place. Faster ways of transportation as a result of automobiles and railways enhanced the distribution of beer. Pasteurization and icehouses improved the durability of beer (Howard, 2014).

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Martijn P. Ophof (University of Amsterdam) 13 The World Wars and the Prohibition were severe periods for the brewery industry. By producing mostly alcohol-free beer and soft drinks, breweries were able to survive. After all, the brewery industry was remarked by fewer breweries, but with increased size. Many breweries were damaged, and the shortage of barley in Europe and the USA appeared the emergence of the more standardized “American” pale lagers (Howard, 2014). However the market for pale lagers, the most common beer, has consolidated, opportunities have risen to regional and national brewers to produce specialty beers. According to Scherer (1975), the strong brand loyalties are the main reason that small breweries can survive serving local regions. These royalties make it more difficult for larger brewers to penetrate the market.

Policy changes also contributed to the remarkable consolidation process in the brewing industry, for example, the antitrust legislation in the USA, the possibility to advertise on national television and the opening of new markets. Even the World Trade Organization (WTO) is promoting a global beer market as well. For example, India’s government was ruled by the WTO for excessive burden tariffs on beer imports (Howard, 2014).

Above discussed developments stimulated the consolidation process but technological innovation strengthens the race even more from a fragmented market to a global consolidated market. The automating of brewing and packaging just as the marketing enrollment over the global market from brewery headquarters made it tough to small breweries to gain a larger market share (Adams, 2006).

2.4 Trend in brewing industry

Due to the shrinking mature beer markets in developed countries in the past years, mostly West-Europe, breweries seek to new emerging markets to enter to increase market share and lower the pressure of profits in developed markets (Ebneth & Theuvsen, 2007). When a brewery wants to enter a new (emerging) market, a brewery can acquire another brewery (target) in that market, or it can internally develop business in that market by a greenfield investment (Trautwein, 1990). Initially, strategic alliances and joint ventures with local partners (restaurants, cafes, and supermarkets) were popular ways to enter new markets, but nowadays M&As appear as the tool to enter emerging areas and increase profits. Examples of these emerging markets are China, India, Africa and Latin-America (Geppert, Dörrenbächer, Gammelgaard, & Taplin, 2013) (Howard, 2014).

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Martijn P. Ophof (University of Amsterdam) 14 In the case of a market entry trough a greenfield investment, entry barriers have to be beaten. The costs to beat those entry barriers are part of the investment costs. According to Porter (1980), the decision between an acquisition in a new market or an internal development of business (greenfield investment) relies upon these investment costs. If a brewery wants to acquire another brewery in a new market, it has to determine the price that is willing to pay for the target firm including the costs for entry of the market (acquisition premium). Although M&As are popular amongst breweries to enter markets, acquisitions are riskier than strategic alliances and joint ventures with local partners because they require a higher level of financial investment (Geppert, Dörrenbächer, Gammelgaard, & Taplin, 2013).

Since the mid-1990’s, the volume of the top seven world’s largest brewers has increased at an overwhelming speed; their volume share acceleration was about four times the pace of the total industry volume. Total M&A expenses of the largest global players in the brewing industry from 2000 to 2005 were more than €75 billion (Ebneth & Theuvsen, 2007). Obviously, brewers see M&As as the primary way to enter a market and increase market share. In the previous parts we have examined M&As in general, the measurements of M&A success on short- and long-term and its effect on shareholders' value. Furthermore, we extensively point out the brewery industry characteristics, the trend, and M&As within the brewing industry. Hereafter we will focus on the M&A activities and strategies of the big four, Heineken, Carlsberg, SAB Miller and AB-InBev and their effect on shareholder value.

2.5 Big Four: M&A part of strategy in brewing industry

If we take a closer look at the existing literature about the different strategies of the Big 4; AB-InBev, SAB Miller, Heineken, and Carlsberg, all headquartered in Europe, there can be made a distinction between the takeover strategies of the global beer market players. Heineken focuses more on smaller M&As with a rather low financial exposition. Whereas the two largest brewers in the world, AB-InBev, and SAB Miller have gained market share increase through large acquisition with a higher financial exposition and large premiums, a more aggressive strategy (Geppert, Dörrenbächer, Gammelgaard, & Taplin, 2013) (Ebneth & Theuvsen, 2007). Carlsberg is the most dominant brewer in Eastern Europe and focuses besides Eastern Europe on Asia and Western Europe. Still, Carlsberg is the least global brewer (Howard, 2014). In

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Figure 2 the M&A activity and transaction values are illustrated resulting in the big four from

2000 to 2012.

Figure 2: Ownership changes from 2000-2012 resulting in the global big four: Source: (Howard, 2014)

Last year the brewing industry witnessed the largest-scale announcements in history ever, AB-InBev announced a bid to SAB Miller for 44 £ per share and therefore offered a premium of approximately 50% to SAB Miller's shareholders (AB-Inbev, 2015). According to Buckley & Mulier (2015) AB-InBev valued SAB Miller for approximately 107b $, resulting in the world’s largest brewer that is selling one in every third beer worldwide. Directly after the first announcement of the takeover the stock prices of both the acquirer and target firm moved heavily. The M&A is not completed yet since the competition authorities have to give approval in certain regions.

According to studies of Mehta & Schiereck (2012) and Ebneth & Theuvsen (2007), the stock market values brewery M&A announcements at a right price or even see a possible extraordinary synergy arising resulting in a positive short-term abnormal return. Another

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Martijn P. Ophof (University of Amsterdam) 16 study by Madsen, Pedersen & Lund-Thomsen (2011) investigated the performance of the big four according to a control group of 200 breweries and concluded that the performance of the big four was not better than the control group. Besides that conclusion, the growth in turnover and total acquisition expenses are offset to each other. SAB Miller and AB-InBev have had an approximately similar growth from 2000 to 2009. However, SAB Miller expenses on M&A in the period from 2000 to 2009 were only one-third of the M&A expenses of AB-InBev. Heineken’s and Carlsberg ratio of acquisition expenses to the turnover was equal. Nevertheless, the growth turnover of Heineken was 40% higher than Carlsberg. This difference can be the result of Heineken's efficient production and management but also by strategic positions.

Mehta & Schiereck (2012) found a significant positive abnormal return for the big four announcing M&As. Likewise, they concluded that missing out an M&A opportunity by rivals, will experience a significant decline in short-term return. Asquith, Bruner, & Mullings Jr, (1983) also investigated abnormal returns within the overall takeover market not specific to one industry. They took a closer look at mergers part of a so-called merger program. They found that the benefits of engaging in multiple mergers in a short period were not capitalized in the acquirer stock prices at or before the announcement date.

According to Bruner (2002), we should expect that the short-term return of M&As in general for acquirer shareholder is equal to zero. The premium (50%) offered by AB-InBev last year to buy SAB Miller was much higher than 43% reported by Eckbo (2008) as average premium based on all US deal from 1980 to 2005. Díaz, Azofra, & Gutiérrez (2009) investigated M&A transactions in the banking sector from 1995 to 2004 and found a relative maximum of 21% acquisition premium. This premium is relative to acquirer abnormal return; premiums had a positive effect on the abnormal return because of the expected synergies with a maximum of 21%. Premiums that were higher than 21% reflected an overpriced deal in the banking sector, which harmed the acquirer shareholders return. Also, the long-term study of Healy, Palepu, & Ruback (1997) concluded that no additional cash flows were generated beyond the amount that is necessary to cover the acquisition premium.

To distinguish the difference in strategies and risk-taking of the big four breweries, we are using the study of Geppert, Dörrenbächer, Gammelgaard, & Taplin (2013). This study

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Martijn P. Ophof (University of Amsterdam) 17 analyzed the managerial risk-taking in international acquisition activities of Heineken, Carlsberg, Anheuser-Busch (currently part of AB-InBev) and S&N (now 50% part of Heineken and 50% of Carlsberg). To label risk profiles, the following criteria were analyzed: the acquisition premium in percentage paid to the target, the relative size of the target, the emphasis of after merger integration and the rate of dependency on capital markets. Breweries that have a high rate of dependency on capital markets are more willing to participate in risky acquisitions. Whereas Heineken and Carlsberg are subsequently family- and foundation owned for the majority. Overall risk profile findings are outlined according to joined theories about ownership, country of origin, the size of home market, foreign presence and the assessment of risk-taking. These results are presented in figure 3. (Geppert, Dörrenbächer, Gammelgaard, & Taplin, 2013).

Figure 3: Risk profiles Heineken, Carlsberg and Anheuser-Busch (currently part of AB-InBev) and S&N (currently 50% part of Heineken and 50% part of Carlsberg). Source: (Geppert, Dörrenbächer, Gammelgaard, & Taplin, 2013).

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Martijn P. Ophof (University of Amsterdam) 18 Based on all M&As from 2000 to 2016 we can illustrate the M&A expenses of the big four in the percentage of the total big four M&A expenses graphically. This is shown below in figure 4.

Figure 4: Big four M&A expenses from 2000-2016 as percentage of total M&A expenses of big four. Source: own calculation. AB-InBev 79% SAB Miller 12% Heineken 7% Carlsberg 2%

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3. Research question and hypothesis

The brewing industry is of interest because of the huge amount of M&As and the sprint of the industry from a locally fragmented market to a global consolidated market in the last decade. Second, product innovation is limited in the brewing industry because of the product characteristics. Furthermore, the opening of new emerging market; policies that are more flexible, the technological innovation has had a great impact on the M&A activity. Moreover increased market share will lead to monopoly pricing and increased power on contracts. Assuming that M&A announcements reveal information about future profits and expected synergies which will be reflected in the stock price. Studies investigating the abnormal return for target shareholders are clear, these shareholders earn a significant return on M&A announcements (Bruner, 2002). Acquirer shareholders return varies, therefore it remains a striking issue.

This study only focuses on the short-term value creation to acquirer shareholders of the big four breweries. What is the abnormal return, if any, to acquirer shareholders in the brewing industry related to M&A announcements? To measure this shareholder wealth effect, we examine the M&A announcements of the big four from 2000-2016 using the event-study methodology described by MacKinlay (1997). According to the monopoly theory, M&As should increase acquirer shareholder return as a result of market share increase (Trautwein, 1990). Industry specific studies investigating short-term abnormal return varies from negative to significant positive returns. Given the brewery industry characteristics, the sprint to consolidation in the brewing industry, we expect to see a positive acquirer return for a shareholder of the big four. Because of the big part of friendly horizontal mergers, the importance of M&A within the brewer’s strategy as a tool for entering new emerging markets and increasing (global) market shares. On top of that, we also expect a positive abnormal return for the big four brewers because of rivalry and the search for suitable targets. Long-term performance is beyond the scope of this study, although we can notice possible differences in short-term return over years. If we even take a closer look at the M&A activities of the big four, the question rises which M&A strategy pays off the most for acquirer shareholders in the short run. We expect that AB-InBev's and SAB Millers shareholders who are involved in much more and riskier acquisitions earn a lower abnormal return to M&A

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Martijn P. Ophof (University of Amsterdam) 20 announcements in comparison with Heineken’s and Carlsberg’s shareholders. Therefore, we make a comparison between the acquirer shareholder’s return of the big four breweries.

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4. Data and methodology

4.1 Sample Data

Firm stock data and market index data are collected from Yahoo Finance. Event dates, targets, transaction values and other M&A information collected from Zephyr M&A Database. Selection criteria for M&A announcements:

1. UK SIC 2007 industry: manufacture of beer. Acquirer and target are both producers of beer.

2. Mergers and acquisitions announced between January 1st_{, 2000 and January 1}st_{, 2016.}

3. The acquirer is AB-InBev, SAB Miller, Heineken or Carlsberg.

4. The acquirer’s stock data is available for at least 180 days before the announcement date.

5. Transaction value is at least €50 million.

6. Information about M&A transaction is publicly announced. 7. The M&A is completed.

Total data selections consist of 52 M&A announcements resulting in 44 events after correction of M&A announcements clustered within the same event window. Furthermore, an M&A announcement combined with an IPO and unsubscribed offering to Carlsberg, a capital injection to a subsidiary is removed from the sample. An overview of the sample with more detailed information about the announcements is illustrated in figure 12, attached in the appendix.

4.2 Methodology 4.2.1 Event study

In this part, we will elaborate how to measure and test the abnormal return of M&A announcements of the big four. This study will use the event study methodology described by MacKinlay (1997). His methodology is frequently used for examining the abnormal return on M&A announcements, for example by Mehta & Schiereck (2012), Choi & Russell (2004) and Ebneth & Theuvsen (2007).

The major underlying assumption of the event study methodology is that an event reveals information that will affect the stock price around the event date. Another assumption is that

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Martijn P. Ophof (University of Amsterdam) 22 stock prices are predictable to some point. Given these assumptions, it is possible to examine the effect of M&A announcements on stock price data. Setting up an accurate event window is one of the most important steps. Although the announcement is at a specific date, it is commonly used to establish an event window that is larger than one day. It may be the case that information has leaked before the official announcement date and therefore affect the stock prices. In that case, setting up a broader event window encourages a more accurate estimation of M&A announcement effect on the stock. Additionally, investors need to have some time to estimate the extent of economic implications as a result of a M&A announcements; this can be a few days or even weeks. The cumulative abnormal return over the event window gives a more accurate view of the abnormal return over time. On the other side, if the event window is too large, other possible events/factors (e.g. dividend announcements and presentation of quarterly results) can influence the stock prices and affect the estimation. In this study, we will set multiple event windows to see what is the effect on the abnormal return. Also, the use of different event windows enhances the sensitivity of the empirical results.

The timeline for an event study is illustrated in Figure 5. The estimation window (T0 -

T1) is used to predict the normal return, expressed in days. T=0 denotes the day of the event

(M&A announcement). The event window (T1 – T2) covers the event, the M&A announcement.

It is crucial that the event window not overlaps with the estimation window. In this study, we will use an event window of 21 days, 10 days before the announcement and 10 days after, expressed as follows: 10, +10]. Likewise, we will analyze other event windows 5, +5] and [-1, +1].

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Martijn P. Ophof (University of Amsterdam) 23 4.2.2 Abnormal return

We can differentiate between two kinds of returns, the actual return and the normal return of a given stock. The normal return is the predicted stock return in case the event did not take place. To examine the effect of a M&A announcement, we have to calculate the abnormal return, which is the difference between the actual return and the normal return. In this way, we can compute the abnormal return for a given brewer security for one specific day in the event window.

𝐴𝑅_𝑖,𝑡= 𝑅_𝑖,𝑡− 𝐸(𝑅_𝑖,𝑡)

Where ARi,t , Ri,t and E(Ri,t) are abnormal return, actual return and normal return for a given

security i and day t (MacKinlay, 1997). 4.2.3 Normal return

There are several ways to predict the normal return according to MacKinlay (1997). The constant mean return model and the market model are statistical methods. Also, economic models are used, but statistical models are preferred in event studies nowadays. Brown & Warner (1985) investigated the daily stock return in event studies; they conclude that simple approaches like constant return model and market model perform well in short-term event studies. The method for predicting normal return is more important in the case of a long-term study (Kothari & Warner, 2008).

In this study, we will use the market model, which predicts the normal return based on the return of a market portfolio. Common used market portfolios are broad-based stock indexes such as the AEX and the S&P500. The normal return is estimated over the estimation window using linear regression. In this study, the estimation window is (T0(-180 days) – T1(-10 days)), which is equal to 170 days. The joint normality of the security returns and market returns

is a primary assumption of the market model (MacKinlay, 1997). The normal return for a given brewer’s security on day t, is computed as follows:

𝐸(𝑅𝑖,𝑡) = 𝛼𝑖+ 𝛽𝑖𝑅𝑚𝑡+ 𝜀𝑖𝑡,

where 𝛼_𝑖, 𝛽_𝑖 & 𝜀_𝑖𝑡 are the parameters captured by the regression, and 𝑅_𝑚𝑡 is the return of the market. The variance of the zero mean disturbance term is denoted by σ_𝜀𝑖2_{. In order to simplify}

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Martijn P. Ophof (University of Amsterdam) 24 the notation, assume that L1 = T1 – T0 be the length of the estimation window, and L2 = T2 – T1

the length of the event window, the variance of the zero mean disturbance term ( 𝜀𝑖𝑡) is: σ_𝜀𝑖2₌ 1

𝐿1 – 2 ∑ (𝑅𝑖𝑡 − 𝛼𝑖− 𝛽𝑖𝑅𝑚𝑡

𝑇1

𝑇0+1 )2

The variance of the abnormal return σ2_(𝐴𝑅

𝑖𝑡) consist of σ𝜀𝑖2 and the variance along the sample error of 𝛼_𝑖 & 𝛽_𝑖. Because the length of our estimation window is large, 170 days, the variance along the sample error will approach zero, therefore the variance of the abnormal return will be σ_𝜀𝑖2 (MacKinlay, 1997).

The market portfolios, all value-weighted, used for the big four are: 1. Heineken – AEX (Euronext Amsterdam)

2. AB-InBev – BEL 20 (Euronext Brussels)

3. Carlsberg – OMXC20 (Copenhagen stock exchange) 4. SAB Miller – FTSE 100 (LSE London)

5. AMBev SA – IBOVESPA (Sao Paolo), useful for one event analysis. 4.2.4 Cumulative abnormal return

For each brewer, the M&A announcements will be analyzed individually. To notify abnormal returns within an event window, aggregation of abnormal returns is needed. In this way, we can detect abnormal returns for the different event windows. For aggregating the abnormal returns, it is required that the event windows of the various M&A announcements not overlap. The 𝐶𝐴𝑅(𝑡1, 𝑡2) is the cumulative abnormal return for one of the Big four brewers from t1 to t2,

a time period between the boundaries of the event-window:

𝐶𝐴𝑅𝑖(𝑡1, 𝑡2) = ∑ 𝐴𝑅𝑖𝑡 𝑡₂

𝑡1

As the length of the estimation window increases and the estimation window is large, the variance of the cumulative abnormal return is:

σ_𝑖2_(𝑡

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Martijn P. Ophof (University of Amsterdam) 25 To test CARi for significance (α= 0,05), the z- score is computed as follows:

𝑧 − 𝑠𝑐𝑜𝑟𝑒: 𝐶𝐴𝑅𝑖(𝑡1, 𝑡2) √σ_𝑖2(𝑡1, 𝑡2) 4.2.5 Cumulative average abnormal return

So far, we have calculated the cumulative returns using different event windows for each brewer’s M&A announcements. To compare the abnormal returns of each big four brewers, we have to analyze the Cumulative Average Abnormal Return (𝐶𝐴𝐴𝑅).

𝐶𝐴𝐴𝑅(𝑡₁, 𝑡₂) = 1

𝑁∑ 𝐶𝐴𝑅𝑖(𝑡1, 𝑡2) 𝑁

𝑖=1

Where, the amount of M&A announcements for each brewer is denoted by N. The variance of the CAAR is:

𝑣𝑎𝑟(𝐶𝐴𝐴𝑅(𝑡1, 𝑡2)) = 1 𝑁2∑σ𝑖2 𝑁 𝑖=1 (𝑡1, 𝑡2)

With the results of CAAR per brewer and the number of events per brewers the CAAR of the total sample can be calculated.

4.2.6 Testing CAAR for significance

Hypothesis for each brewer (denoted by i):

H0 : CAARi= 0

H1 : CAARi≠ 0 with α = 0,05, two-tailed

𝑧 − 𝑠𝑐𝑜𝑟𝑒 = 𝐶𝐴𝐴𝑅(𝑡1, 𝑡2) √𝑣𝑎𝑟(𝐶𝐴𝐴𝑅(𝑡1, 𝑡2))

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Martijn P. Ophof (University of Amsterdam) 26 4.2.6 Clustering events

In the case of an overlap of event windows of various M&A announcements, the returns are clustered; meaning that the covariance of the returns are not zero. This can be solved in two ways, aggregating the abnormal returns in one portfolio and analyze the abnormal return as described above. The other way to solve clustering is analyzing the return separately. Although the latter will provide poor statistic power (MacKinlay, 1997). Another study by Lee & Varela (1997) shows that event studies with clustered events are supported with the use of the market model. In this study, we will aggregate the abnormal return in one portfolio in case of clustering events. The event window in this study will remain the same for clustered events because the twenty-one event window covers clustered M&A announcements. For instance during September 2003, Interbrew announced four M&As within thirteen days. Clustering these events will result in a portfolio of four M&As, the main disadvantage of this approach is that the individual events cannot be examined. So, the abnormal return of the portfolio reflects the aggregated abnormal return of the four M&A announcements.

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5. Results

In this chapter, we will present our findings regarding the abnormal return following from M&A announcements for the Big four brewers. We will take a look at each brewer separately, the CAR for the estimation window [-10,+10] is illustrated graphically. Discussed announcements are marked in the graph to differentiate the other announcements. Detailed results are attached in the appendix.

5.1 AB-InBev

During 2000-2016, AB-InBev was the purveyor of M&A announcements with seventeen events in total. Four M&A announcements are aggregated into one event because of clustered returns. The cumulative average abnormal return (CAAR) of AB-InBev was -1,205% and -0,026% for the event windows [-10, +10] and [-5, +5]. The CAAR in the [-1, +1] event window was positive, +0,49 %. All not proven significant. Cumulative abnormal returns are illustrated in figure 6 and show that twelve of the AB-InBev’s announcements give a negative cumulative abnormal return.

The acquisition of AMBEV in June 2005 by Inbev SA, saw a +6,10% abnormal return within [-10, +10] event window, statically significant at 5%. Also in the [-5, +5] event window, the announcement resulted in a significant CAR of +6,95%. However, the acquisition of Brauergilde Hannover in 2002 lead to a decline of -9,91% in share price value of Interbrew, although this event was not proven significant. The abnormal return at t=-1, on the other hand, was -4,05%, significant at 5% level. This can be due the fact that the information about the M&A became public before the event date.

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Figure 6: CAR AB-InBev [-10,+10]

-0,15 -0,1 -0,05 0 0,05 0,1 0,15 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 Cu m u la ti ve a b n or m al r et u rn Days

Pivovarna Union Brauergilde Hannover

Conistrade + China Lion I + Apatinska + Gabriel Sedlmayr HOPS

Braco SA San Interbryu OAO I

China Lion Brewing II San Interbryu AOA II

AMBEV AMBEV II

DAMM SA Fujian Sedrin

Oriental Brewery Anheuser-Busch

AMBEV II #REF!

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Martijn P. Ophof (University of Amsterdam) 29 5.2 SAB Miller

SAB Miller was responsible for nine M&A announcements in the sample after correcting for overlapping event windows. Two M&A announcements are aggregated into one because of clustered returns.

The CAAR for SAB Miller is positive for all event windows, varying from +3,02% for [-5, +5] event window to +0,58 % for [-1, +1] event window, although not proven significant. The abnormal return over time for SAB Millers M&A announcements is illustrated in figure 7, showing six of nine events result in a positive cumulative abnormal return.

The Bavaria SA announcement led to a cumulative return of +11,27 % in the [-5, +5] window, also in the [-1, +1] window SAB Millers stock increased by +9,21 %. Both significant at 5%. Nonetheless, the capital market negatively absorbed the first Birro Peroni Spa M&A announcement, resulting in a stock price drop of -10,02% over the [-10, +10] window, significant at 5%. Before the M&A announcement of Birro Peroni Spa, the cumulative abnormal return increased till t=-1, after the M&A announcement at t=0, the CAR decreased enormously.

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Figure 7: CAR SAB Miller [-10, +10]

-0,15 -0,1 -0,05 0 0,05 0,1 0,15 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 Cu m u la ti ve a b n or m al r et u rn Days

Miller Brewing Company Birra Peroni Spa Harbin Brewery Group Birra Peroni Spa 2

Bavaria SA Bavaria SA 2 & Union De Cervecerias Peruanas Backus

Foster's India LTD Sarmat CJSC

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Martijn P. Ophof (University of Amsterdam) 31 5.3 Heineken

Heineken announced thirteen M&As from 2000-2016. Six announcements overlapped with other event windows, as a result, six announcements were aggregated into three events because of clustered returns.

Heineken's CAAR over the three event windows is positive as well, however not at a significant level. In the [-5, +5] window the cumulative average abnormal return is +1,35%, in the [-10, +10] window +0,79%. Eight announcements resulted in a positive CAR in the [-10, +10] period, presented in figure 8.

One outliner in our sample is the aggregated event of two announcements of Bedel Brewery and Harar Brewery. The CAR of this aggregated announcement is -14,92% for the [10, +10] event window, significant at 5%. If this event is ignored in our analysis, the CAAR of Heineken for the [-10, +10] window will become +1,94%. So, the overall CAAR for Heineken is highly influenced by this event. On the other hand, the announcement of the Kombinat Pivovaryonoi resulted in a stock price increase of +9,76% over the [-10, +10] window. Also in the event window of [-1, +1] the announcement lead to a CAR of +8,65%, both significant at 5%.

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Figure 8: CAR Heineken [-10, +10]

-0,15 -0,1 -0,05 0 0,05 0,1 0,15 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 Cu m u la ti ve A b n or m al r et u rn Days

Bravo Molson Companies LTD

Al Ahram Beverages Inversions Y Rentas & Karlovacka Pivovara

Brau Union - BBAG Kombinat Pivovaryonoi

Piovarni Ivana Femsa Cerveza

Bedel Brewery & Harar Brewery Pivara Skopje

Namibia Breweries Laguntias Brewing

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Martijn P. Ophof (University of Amsterdam) 33 5.4 Carlsberg

Carlsberg was the least active brewer of the big four. During the sample period, Carlsberg announced five M&As. Two overlapping events are aggregated, both targets (Holsten-Brauerei AG) are the same, but the transaction was split up in the Zephyr database.

Carlsberg’s CAAR is positive for all three event windows. The CAAR in the [-1, +1] is +0,04%, in the [-10, +10] window +0,81% and the highest in the [-5, +5] window with +1,62%. All not proven significant. Three M&A announcements lead to a positive CAR over the [-10, +10] window, presented in figure 9.

The acquisition of the remaining 40% of Carlsberg A/S’s shares evolved a CAR of +9,37% in the [-10, +10] window, significant at 5% level. In contract, the Holsten-Brauerei AG announcement declined the stock price of Carlsberg by -7,50% over this period.

Figure 9: CAR Carlsberg [-10, +10]

-0,1 -0,05 0 0,05 0,1 0,15 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 Cu m u la ti ve A b n or m al r et u rn Days TÜRK TUBORG HOLSTEN_BRAUEREI AG

Carlsberg A/S Carlsberg Brewerie Hong Kong LTD CHONGQING JIANIANG BREWERY

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Martijn P. Ophof (University of Amsterdam) 34 5.5 Summary results

The cumulative average abnormal returns vary along the big four. SAB Miller's announcements lead to the highest CAAR over all event windows. Followed by Heineken and after that Carlsberg. AB-InBev’s CAAR is negative for two event windows, showing that M&A announcements will decrease shareholder’s value for the given periods. In figure 10 the CAAR for the big four is clearly offset against each other. However, these results are not proven significant at 5%, so H0 cannot be rejected for each of the four brewers. AB-InBev earn a

negative/lower return compared to the other brewers, this is in line with our expectations.

Events CAAR [-10, +10] CAAR [-5, +5] CAAR [-1, +1] AB-InBev 17 -1,02% -0,26% 0,50% SAB Miller 9 1,80% 3,02% 0,58% Heineken 13 0,79% 1,35% 0,34% Carlsberg 5 0,81% 1,62% 0,04%

Figure 10: CAAR of the big four for event windows [-10, +10], [-5, +5] and [-1, +1]

The CAAR of the total sample of M&A announcements is positive for all event windows; these results show that M&A announcements on average are positively captivated by the stock market. Notwithstanding, these results are not proven significant at 5%, presented in figure 11.

CAAR [-10, +10] CAAR [-5, +5] CAAR [-1, +1]

CAAR of total sample 0.30% 1,10% 0,41 %

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6. Conclusion and discussion

In this study, we investigate whether there is an abnormal return for big four brewers following from 52 M&A announcements from 2000 till 2016. Using an event study methodology described by MacKinlay (1997), we find insignificant positive abnormal returns for SAB Miller, Heineken and Carlsberg and insignificant negative abnormal returns for AB-InBev for two event windows. We do find significant returns analyzing M&As individually. Our findings are in line with Ebneth & Theuvsen (2007), who found no significant positive return for the brewing industry from 2000 to 2005. A later study (Mehta & Schiereck, 2012) in wich the brewing industry was investigated from 1998 to 2005 revealed significant positive abnormal returns, our results suggests positive abnormal returns but are not proven significant.

Because innovation within the brewing industry is constrained, M&As are mostly with to goal to increase market share. According to the monopoly theory, M&As with the goal to increase market share will enhance acquirer’s shareholder value, our results for the abnormal return for the total sample are in agreement with this theory. Furthermore, the M&As are mostly horizontal strategic takeovers, which can create more synergies and pay a lower acquisition premium.

M&A announcements of AB-InBev affect acquirer's stock price negatively. This is mostly caused by the takeover strategy of AB-InBev, which is characterized by large acquisitions with high acquisition premiums (Geppert, Dörrenbächer, Gammelgaard, & Taplin, 2013). Announcements of SAB Miller, Heineken and Carlsberg, resulted in insignificant positive returns. This indicates that the capital market (investors) signal the extraordinary synergies arising from these announcements for these brewers.

Limitations of our study are the equally weighted takeovers; some M&As influence the result heavily, also because the relatively small number of events during the sample period. Therefore, future research should focus on the takeover’s weights in calculating the abnormal returns. In addition to that, weights or ranks on acquisitions premiums and transaction values enlarge the power of such analysis. It is beyond the scope of this thesis to look at the long-term economic (accounting-based) performance of the big four after M&As have taken place,

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Martijn P. Ophof (University of Amsterdam) 36 although this an interesting future topic. Which M&A strategy will contribute to long-term economic performance? It is important to keep the relation between short-term return on stock and long-run economic performance in mind.

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7. Appendix

Figure 12: M&A announcements by big four 2000-2016

Acquirer name Target name Deal type Deal Value th

EUR

Announced date

1 INTERBREW SA PIVOVARNA UNION DD Acquisition remaining 59.08% € 76,500.00

23/07/2002 2 INTERBREW SA BRAUERGILDE HANNOVER AG Acquisition 85.4% €

491,000.00

15/11/2002 3 INTERBREW SA CONISTRADE (M) SDN BHD Acquisition €

104,440.97

05/09/2003 4 INTERBREW SA CHINA LION BREWING GROUP Acquisition 50% €

104,660.85

08/09/2003 5 INTERBREW SA APATINSKA PIVARA AD Acquisition increased from

9.37% to 50%

€ 146,550.00

11/09/2003 6 INTERBREW SA GABRIEL SEDLMAYR

SPATEN-FRANZISKANER-BRÄU KGAA

Minority stake 29% € 200,000.00

18/09/2003 7 INTERBREW SA HOPS COOPERATIEVE UA Acquisition 100% €

612,000.00

07/01/2004

8 INTERBREW SA BRACO SA Acquisition 100% €

3,300,000.00

03/03/2004 9 INBEV SA SAN INTERBRYU OAO Acquisition unknown stake % €

894,000.00

12/08/2004 10 INTERBREW SA CHINA LION BREWING GROUP Acquisition increased from

50% to 100%

€ 105,971.91

21/09/2004 11 INBEV SA SAN INTERBRYU OAO Minority stake 21% €

259,700.00

05/01/2005 12 INBEV SA COMPANHIA DE BEBIDAS DAS

AMERICAS - AMBEV

Acquisition increased from 41.18% to 54.16%

€ 1,067,442.03

14/02/2005 13 INBEV SA COMPANHIA DE BEBIDAS DAS

AMERICAS - AMBEV

Acquisition unknown stake % € 500,000.00

14/06/2005 14

ANHEUSER-BUSCH INBEV NV

DAMM SA Minority stake unknown % € 181,129.90

25/10/2005 15 INBEV SA FUJIAN SEDRIN BREWERY CO., LTD. Acquisition 100% €

575,477.64

23/01/2006 16 INBEV SA ORIENTAL BREWERY CO., LTD Acquisition increased from

95.09% to 100%

€ 55,700.09

21/06/2006 17 INBEV SA ANHEUSER-BUSCH COMPANIES INC. Acquisition 100% €

41,173,600.00

14/07/2008 18 AMBEV SA COMPANHIA DE BEBIDAS DAS

AMERICAS - AMBEV

Acquisition increased from 61.9% to 100% € 32,390,324.97 07/12/2012 19 ANHEUSER-BUSCH INBEV NV

ORIENTAL BREWERY CO., LTD Acquisition 100% € 4,210,692.11

20/01/2014 20

ANHEUSER-BUSCH INBEV NV

CAMDEN TOWN BREWERY LTD Acquisition 100% € 115,375.67

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21 CARLSBERG A/S TÜRK TUBORG BIRA VE MALT SANAYII AS

Acquisition increased stake from 2.24% to 50.01%

€ 61,719.57

31/05/2001 22 CARLSBERG A/S HOLSTEN-BRAUEREI AG Acquisition 51% €

266,480.00

20/01/2004 23 CARLSBERG A/S HOLSTEN-BRAUEREI AG Acquisition increased from

51% to 97.55%

€ 243,220.00

20/01/2004 24 CARLSBERG A/S CARLSBERG BREWERIES A/S Acquisition increased from

60% to 100%

€ 1,986,583.78

19/02/2004 25 CARLSBERG A/S CARLSBERG BREWERY HONG KONG

LTD

Acquisition € 64,848.00

01/09/2005 26 CARLSBERG A/S CHONGQING JIANIANG BREWERY CO.,

LTD

Minority stake 18.58% € 78,361.50

14/11/2012 27 HEINEKEN NV BRAVO INTERNATIONAL Acquisition 100% €

449,840.00

01/02/2002 28 HEINEKEN NV MOLSON COMPANIES LTD Minority stake 20% €

236,896.00

19/03/2002 29 HEINEKEN NV AL AHRAM BEVERAGES COMPANY SAE Acquisition 100% €

228,136.30

13/09/2002 30 HEINEKEN NV INVERSIONES Y RENTAS SA Acquisition 50% €

254,975.60

14/01/2003 31 HEINEKEN NV KARLOVACKA PIVOVARA DD Acquisition 68.8% €

85,122.90

14/01/2003 32 HEINEKEN NV BRAU UNION AG Acquisition increased from

68.78% to 98.7%

€ 380,810.00

19/11/2003 33 HEINEKEN NV BBAG OESTERREICHISCHE

BRAU-BETEILIGUNGS AG

Acquisition increased from 70.49% to 98.73%

€ 302,570.00

19/11/2003 34 HEINEKEN NV SOBOL BEER LLC Acquisition 100% €

52,654.00

01/10/2004 35 HEINEKEN NV KOMBINAT PIVOVARYONOI I Acquisition 100% €

113,836.20

06/07/2005 36 HEINEKEN NV PIVOVARNI IVANA TARANOVA OOO Acquisition 100% €

415,744.00

16/08/2005 37 HEINEKEN NV FEMSA CERVEZA SA DE CV Acquisition 100% €

4,434,177.00

11/01/2010 38 HEINEKEN NV BEDELE BREWERY SC Acquisition 100% €

60,163.36

11/08/2011 39 HEINEKEN NV HARAR BREWERY SC Acquisition 100% €

55,208.73

11/08/2011 40 HEINEKEN NV PIVARA SKOPJE AD Acquisition increased from

55.3% to 96.5%

€ 79,100.00

10/11/2011 41 HEINEKEN NV NAMIBIA BREWERIES LTD Minority stake 15%, 25% and

42%

€ 163,896.07

28/07/2015 42 HEINEKEN NV LAGUNITAS BREWING COMPANY Acquisition 50% €

196,098.50

08/09/2015 43 SOUTH AFRICAN

BREWERIES PLC

MILLER BREWING COMPANY Acquisition 100% € 5,653,760.00

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44 SABMILLER PLC BIRRA PERONI SPA Acquisition 60% € 246,000.00

14/05/2003 45 SABMILLER PLC HARBIN BREWERY GROUP LTD Minority stake 29.64% €

75,301.91

29/06/2003 46 SABMILLER PLC BIRRA PERONI SPA Acquisition increased from

60% to 99.8%

€ 162,500.00

23/02/2005 47 SABMILLER PLC BAVARIA SA Acquisition 71.77% €

4,235,886.00

19/07/2005 48 SABMILLER PLC UNIÓN DE CERVECERÍAS PERUANAS

BACKUS Y JOHNSTON SAA

Acquisition increased from 79.7% to 94%

€ 296,696.40

25/10/2005 49 SABMILLER PLC BAVARIA SA Acquisition increased from

71.77% to 96.96%

€ 1,567,064.52

28/10/2005 50 SABMILLER PLC FOSTER’S INDIA LTD Acquisition 100% €

94,584.00

04/08/2006 51 SABMILLER PLC SARMAT CJSC Acquisition 99.84% €

82,810.00

08/05/2008 52 SABMILLER PLC KOMPANIA PIWOWARSKA SA Acquisition increased from

71.9% to 100%

€ 837,097.27

14/05/2009

Total Transaction value €

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Figure 13: CAR and CAAR for AB-InBev

Figure 14: CAR and CAAR for SAB Miller

CAR

Events Datum Acuiror Target [-10 ; + 10] Significant (5%) [-5;+5] Significant (5%) [-1;+1] Significant (5%)

1 23/07/2002 Interbrew SA Pivovarna Union -0.041703557 -0.007030987 -0.00802732

2 15/11/2002 Interbrew SA Brauergilde Hannover -0.099062143 0.002825805 -0.012819766

3 11/09/2003 Interbrew SA Conistrade + China Lion I + Apatinska + Gabriel Sedlmayr -0.033111646 -0.074480987 -0.014709399

4 07/01/2004 Interbrew SA HOPS 0.04689574 -0.045746318 -0.031229602

5 03/03/2004 Interbrew SA Braco SA -0.018493894 -0.014066752 -0.023207665

6 12/08/2004 Inbev SA San Interbryu OAO I -0.009925317 0.044426929 0.012670269

7 21/09/2004 Interbrew SA China Lion Brewing II -0.03931691 -0.042022765 0.004442073

8 05/01/2005 Inbev SA San Interbryu AOA II -0.045212949 -0.024644297 -0.003455022

9 14/02/2005 Inbev SA AMBEV 0.011646108 0.008871967 0.009240349

10 14/06/2005 Inbev SA AMBEV II 0.060978117 * 0.069461182 * 0.002865267

11 25/10/2005 AB-InBev DAMM SA -0.003780021 0.023294771 1.10877E-05

12 23/01/2006 Inbev SA Fujian Sedrin -0.010016086 -0.029262098 0.01158635

13 21/06/2006 Inbev SA Oriental Brewery -0.008188382 0.013470393 0.010639829

14 14/07/2008 Inbev SA Anheuser-Busch 0.05044031 -0.02839119 0.053970224 *

15 07/12/2012 Ambev SA AMBEV II 0.060300033 0.125022289 * 0.077591844 *

16 20/01/2014 AB-InBev Oriental Brewery II -0.057717402 -0.029667082 0.008947258

17 21/12/2015 AB-InBev Camden Town Brewery -0.037224625 -0.035858235 -0.014067061

Events 17 CAAR -0.010205448 -0.002576316 0.004967571

Minimum -0.099062143 -0.074480987 -0.031229602

Maximum 0.060978117 0.125022289 0.077591844

Variance CAAR 0.000229438 0.000120182 3.27769E-05

Test -0.673750599 -0.235006324 0.867681242

P value 0.125117472 0.203550956 0.403607786

Significant or not? not significant not significant not significant

Postive AR 5 7 10

Negatieve AR 12 10 7

CAR

1 30/05/2002 South African Breweries PLC Miller Brewing Company -0.030542675 0.04000747 0.004570597

2 14/05/2003 SAB Miller Birra Peroni Spa -0.100195379 * 0.00399588 -0.046067614 *

3 29/06/2003 SAB Miller Harbin Brewery Group 0.051812286 -0.0276558 -0.001928011

4 23/02/2005 SAB Miller Birra Peroni Spa 2 0.033570262 0.04675334 * 0.009203566

5 19/07/2005 SAB Miller Bavaria SA 0.098731525 0.11274238 * 0.092136916 *

6 26/10/2005 SAB Miller Bavaria SA 2 & Union De Cervecerias Peruanas Backus -0.013108324 0.01334665 0.00804983

7 04/08/2006 SAB Miller Foster's India LTD 0.033365635 0.03086807 -0.006307293

8 08/05/2008 SAB Miller Sarmat CJSC 0.007786778 0.04019245 -0.011199188

9 14/05/2009 SAB Miller Kompania Piwowarska 0.080223228 0.01116409 0.003748179

Events 9 CAAR 1.80% 3.02% 0.58%

Minimum -0.100195379 -0.0276558 -0.046067614

Maximum 0.098731525 0.11274238 0.092136916

Median 0.033365635 0.03086807 0.003748179

Variance CAAR 0.000858146 0.00024687 6.73287E-05

Test 0.61310475 1.91935208 0.70694551

P value 0.36504823 0.48626505 0.380099915

Postive AR 6 8 5

(41)

Figure 15: CAR and CAAR for Heineken

Figure 16: CAR and CAAR for Carlsberg

CAR

1 01/02/2002 Heineken Bravo 0.088956102 * 0.065161312 0.026430425

2 19/03/2002 Heineken Molson Companies LTD 0.07435474 0.02156363 -0.00727297

3 13/09/2002 Heineken Al Ahram Beverages 0.022258858 -0.048127222 * -0.02767886 *

4 14/01/2003 Heineken Inversions Y Rentas & Karlovacka Pivovara -0.069016544 -0.020380669 -0.03808858 *

5 19/11/2003 Heineken Brau Union - BBAG -0.069016544 -0.020380669 -0.03808858 *

6 01/10/2004 Heineken Sobol Beer LLC 0.056567624 0.030080154 0.025414661

7 06/07/2005 Heineken Kombinat Pivovaryonoi 0.09667637 * 0.086821063 * 0.086552182 *

8 16/08/2005 Heineken Piovarni Ivana -0.021218383 -0.001843767 0.007754828

9 11/01/2010 Heineken Femsa Cerveza 0.030801869 0.058017532 0.038321081 *

10 11/08/2011 Heineken Bedel Brewery & Harar Brewery -0.149194046 * -0.039161896 * -0.02343 *

11 10/11/2011 Heineken Pivara Skopje -0.048817335 0.008924608 -0.00076368

12 28/07/2015 Heineken Namibia Breweries 0.051022363 0.031558233 -0.0100472

13 08/09/2015 Heineken Laguntias Brewing 0.039199321 0.002731064 0.004759204

Events 13 CAAR 0.79% 1.35% 0.34%

Minimum -0.149194046 -0.048127222 -0.03808858

Maximum 0.09667637 0.086821063 0.086552182

Median 0.030801869 0.008924608 -0.00076368

Variance CAAR 0.000232326 0.000139848 3.81402E-05

Test 0.517662703 1.138089307 0.546334297

P value 0.348826594 0.436229202 0.353790959

Postive AR 8 8 6

Negatieve AR 5 5 7

CAR

1 31/05/2001 Carlsberg TÜRK TUBORG -0.055224129 -0.033067104 -0.019782505 2 20/01/2004 Carlsberg HOLSTEN_BRAUEREI AG -0.074985542 -0.04043547 -0.022210604 3 19/02/2004 Carlsberg Carlsberg A/S 0.093728159 * 0.110242927 * 0.066404888 * 4 01/09/2005 Carlsberg Carlsberg Brewerie Hong Kong LTD 0.016704296 0.015336901 -0.001656057 5 14/11/2012 Carlsberg CHONGQING JIANIANG BREWERY 0.060210901 0.029041787 -0.020970838

Events 5 CAAR 0.008086737 0.016223808 0.000356977 Minimum -0.074985542 -0.04043547 -0.022210604 Maximum 0.093728159 0.110242927 0.066404888 Median 0.016704296 0.015336901 -0.019782505 Variance CAAR 0.001385031 0.000725492 0.000197862 Test 0.217291934 0.602332632 0.025378126 P value 0.293004789 0.363261814 0.25506166

Postive AR 3 3 1