ACQUISITION

PROPOSITION
Team Rambling Souls
Objective
Advising SABMiller to
acquire a 100% stake in
Carlsberg
Team Charter
Saurabh Ashok Thadani 10FN102 Srikanth Kumar Konduri
10FN-109 Tushar Gupta 10FN115 Nikhil Gupta
10FN121

INDEX
GLOBAL BEER INDUSTRY OVERVIEW

SNAPSHOT OF CARLSBERG

4-5

WHY SHOULD SABMILLER ACQUIRE CARLSBERG

6-7

KEY ISSUES TO BE CONSIDERED DURING ACQUISITON

8-9

CREDITWORTHINESS OF SABMILLER

10

VALUE DRIVERS OF CARLSBERG

11

RANGE OF POSSIBLE VALUATIONS

12

KEY ASSUMPTIONS UNDERLYING VALUATION

13

LIMITATIONS OF VALUATION METHODS

14

FUNDING THE DEAL

15

SYNERGIES FROM THE DEAL

1617
18

BID STRUCTURE & EXECUTION STRATEGY

ALTERNATIVES TO CARLSBERG
APPENDIX

1920
2129

GLOBAL BEER INDUSTRY

OVERVIEW
Maintained a CAGR of 3.3% over the
past 5 years.
In 2010, emerging markets grew by
5.7% while developed markets declined
by 1.7%.
Consumption continues to rise in
emerging markets, mainly driven by
growth in population and incomes and
improvements in beer quality
and appearance.
Consumption in developed markets
continues
to
suffer
from
high
unemployment
and
constrained
consumer spending.
The four largest brewers AnheuserBusch InBev, SABMiller, Heineken and
Carlsberg produce almost 50% of
industry volume and generate 70% of
industry profits due to recent M&A

CORPORATE SNAPSHOT OF
CARLSBERG
CARLSBERG BUSINESS BY MARKET
Market
share*
39.70%
7.7% to
38%
1 to 4
56.7%
28.6% to
Eastern
Europe
8%
1 to 2
78%
Source: Company
data, JPMorgan
* Market share ranges are mentioned based on individual country shares within that region19.8% to
Asia
9%
1 to 2
98%
Region
Russia
Northern & Western
Europe

Profit
Contribution
45%

Market
Position
1

No. of
breweries
10
28
17
35

Carlsberg group has a stong beer portfolio of more than 500

brands.
Its well known international premium brands Baltika, Carlsberg and
Tuborg rank among top 6 and Kronenbourg is at 10th position in
Europe.
Strong local brands include Ringnes (Norway), Feldschlsschen
(Switzerland),
Lav (Serbia) and Wusu (Western China).
Presently focussing on fast growth markets, especially in Asia
(Russia)
Undergoing a major rebranding exercise to re-postion the brand

FINANCIAL SNAPSHOT OF
CARLSBERG
COMPANY REPORTED RESULTS & PROJECTIONS (2010-2013)
Income Statement (in
mn. DKK)

2010

2011E 2012E 2013E

Net Sales

60055

63982

Operating Profit

10249

NOPAT

8359

Depreciation

3987

4147

4313

4164.5

CAPEX

-3575

-3626

-3676

4027.95

Working Capital

150

-300

-273.08

Free Cash Flow to the

Firm

8921

9569

10115

9786

Operating Margin
Sales Growth

66605.2 68270.2
6
9
12637.5 13090.9
11500
5
3
9777.55
9048
9922.44
3

The Group has defined its

ambition: to be the fastest
growing
global
beer
company .

17.07% 17.97% 18.97% 19.17%

1.10%

6.50%

4.10%

2.5%

Carlsberg can deliver the fastest CAGR

in net sales and profits among the
global brewers.
Morgan Stanley forecasts the organic
net sales growth of Carlsberg by 6-7%,
against peers at 3.5-6.5% , owing to
Russian volume growth and strong
margin expansion in N&W Europe.

Augments its top strategic

priority of strengthening
international as well as local
brand portfolio (with a focus on
growing markets), combined
entity will account for 20% of
global beer volume.
Post
takeover,
SABMillers
Europe presence will it give
greater leverage for funding the
emerging market growth.
Benefit from
Business
program which

the Carlsbergs
Standardization
is expected to

Inspite of a higher per capita

beer consumption in western
markets, its growth will slow
down and other markets will
soon catchup with it.
As SABMiller wants to reduce
its proportion of revenues from
North America & a part of
Europe (sales in 2010 fell by
1.5% in America and 2.3% in
Western Europe, says Nomura, a
Japanese bank).

SUPPORTING
FACTS

SUMMARY

WHY SHOULD SABMILLER ACQUIRE

CARLSBERG
Enhanced(1)
access to growing
Asian & Russian (emerging)
markets and to enter into a
matured Western Europe market
from where Carlsberg gets 38%
of its profit.

Gives
the
advantage
of
profiting from premiumisation of
brand Carlsberg in LATAM &
African markets apart from
Asian & Russian markets, where
urbanization
and
rising
disposable incomes will drive
the sales of premium brands .
As SABMiller is already having
presence in worlds 10 fastest
growing economies, it can
benefit from rolling-out brand
Carlsberg in those economies
SABM
can
also
volumes
of
its
international brands in
Western Europe.

increase
premier
Russia &

27-Apr-11

Western
Europe
North
America
C & E Europe
Asia
Latin
America
Africa/ME
Emerging
Market

Profit by Market
SABMill Carlsber
er
g
2%

38%

14%
15%
3%

0%
53%
9%

31%
35%

0%
0%

84%

62%

SUPPORTING
FACTS

MARKET
POSITION

WHY SHOULD SABMILLER ACQUIRE

CARLSBERG
(2) the better scale &
Benefit from
profit margins of affordable local
brands which still enjoy a strong
sustained beer consumption
(60% of overall premium).

DEAL ISSUES

KEY RISKS OF
CARLSBERG

KEY ISSUES TO BE CONSIDERED DURING

ACQUISITON
(1)increase in beer
A possible
Carlsbergs growth rate is
majorly influenced by Russias
excise duty will force Carlsberg
macro economic trends and
to pass it on to customers,
growth will be constrained in
which would effect in decreased
Western Europe market for
medium-term.
(Europes
demand resulting in lower
growth will be more of revenue
volumes , net revenue &
management & cost control)
operating profit.
If the Russian Ruble falls
Similarly, Carlsberg will offset
against Euro, both top line &
EBIT level earnings will be
its rising input costs with higher
downgraded.
sales process (though it may
reduce demand) for maintaining
Present
operating margin
projections of SABMiller is
its operation margin targets in
around 22.5-24% during 2011the mid-term.
2015 while it will be just above
19.5% for Carlsberg during this
Exposed to spot market price
period, so shareholders might
feel that takeover will not add
volatility
in
places
where
additional value to them.
hedging of price & volumes is
difficult.
Carlsbergs rich heritage of
200 years and standing needs
New Russian law, which may
to be preserved.
take effect in 2013 would
restrict sales of beer from 11

CONFLICTING
INTERESTS

KEY ISSUES TO BE CONSIDERED DURING

ACQUISITON
(2)
As SABMiller
draws more than 80% of its revenues from Emerging
Markets, acquiring
Carlsberg means a shift in its priority since
Carlsberg draws 38% of its revenues from Western Europe, which is a
matured market (greater risk exposure).
Carlsberg foundation owns 30% stake in Carlsberg Group and has
74% voting rights. If a takeover is not favoured by them, SABMiller will
have to make it an hostile takeover, paying an higher premium.
Russian market is now the 4th largest, grew by 40% since past
decade, but a 200% increase in beer tax imposed by the its
Government in 2010 dampened demand. Will be favorable to SABMiller
only if regulation softens post takeover.
This will be a bigger corporate move than what
SABMiller has done in its past and may face the
challenge of a potential cultural clash.

It has reduced its debt by 16% compared to

2010 and is having the lowest net debt to
EBITDA (1.4 as per annual report 2011) among
the global top 4 brewers, it can use its cash to
make acquisitions for pursuing inorganic growth.
Carlsbergs shareholders might expect an 13x
EBITDA multiple (based on transaction multiple),
which means SABMiller will have to shell out
close to US $ 33 billion for the transaction.
Its free cash flows increased to $2488 mn from
$2088 mn in 2010.
Presently SABMiller can raise the debt to the
amount of US $ 10 billion and will have to raise
additional equity for funding the further deal
amount.

Present Dividend yield is 2.7%, though seems

lower, it is quite sustainable over next 5-7 years
as its 5-year annualized dividend per share
growth stands at 12.9%.
Trailing 12Previous
Parameter
EBIT/Interest
expenses
D/E ratio

months

period

5.1x
27.20%

3.4x
37.50%

EPS Pay-out ratio

46.20%

Source: Capital IQ, as of 27-July-2011

FCFE Pay-out ratio
42.30%
Sustainable growth
Its
dividend
appears to
be well covered by
rate
6.30%
profits, aims to achieve dividend cover of 2-2.5x
adjusted earnings.

Showing signs of good financial health as

Interest coverage ratio is increased and
Debt/Equity ratio is reduced.
Though dividends are sustainable, it needs to
look out for inorganic growth opportunities
through acquisitions funded by its free cash
flows to grow pay-outs at a high rate.
A rating of BBB+ by S&P and Baa1 by Moodys
seems to be well justified. However, caution has
to be exercised owing to its large exposure to
emerging markets.
So has to look out for matured markets for
reducing its EM exposure and rebalance its
global presence for improving the credit rating in
long-run, but it lead to a possible de-rating in

AN ASSESMENT

HIGHLIGHTS

CREDITWORTHINESS OF SABMILLER

VALUE DRIVERS OF
CARLSBERG
Positive Market Influencers
Investments
behind
product
innovations, branding activities
added with channel management
have been the key drivers for
increasing sales from its brand
premiumisation initiative.

Operational Improvements
Despite flat revenues, reported
strong operating profit growth in
France due to positive price/mix,
acquisition synergies and the
ongoing
operational
efficiency
improvements which are being
executed.

Negative mix trends arising out

of sales in cheaper priced outlets,
especially in matured marketsRevenue
(Europe).
& Net
Sales Volume/Revenue
Income Net Income contributors
Carlsbergs portfolio of top
brands in each category were the
major drivers of its market share in
Russia, though remained flat
between Q2 to Q4 of 2010 due to
several hikes in prices.
Carlsberg believes above trend
is just for short-term and long-term
outlook remains positive.

Increase in its Operating margin

to 17.1% can be attributed to
production efficiencies, savings on
input costs through hedging. And
benefits
from
S&N
synergy
(operating expenses declined by
2% organically).

RANGE OF POSSIBLE
VALUATIONS
Proposed
Transaction
Valuation

$30.6B

Discounted
Cash
Flows Analysis
Valuation
Carlsberg
Valuation

Sum of the
Parts
Analysis
Valuation

Comparable
Companies
Analysis
Valuation
Comparable
Transactions
Analysis
Valuation

Enterprise
Value

Equity
Value

DKK139.9B $26.6B*

DKK105.3B$20B

DKK154.7B $29.4B

DKK120B$22.8B

DKK173.7B $33B

DKK139B$26.4B

*1 DKK = 0.19 US $
* Based on publicly available
information till 30 June 2011

KEY ASSUMPTIONS UNDERLYING

VALUATION
Choosing comparable transactions
for Transaction Multiple Valuation
Transactions
that
took
place
between firms that were both from
breweries industry were the only
ones considered.
Acquired firm values of chosen
transactions should be more than
US$ 5000 million.
Also only transactions that took
place after 2004 were considered.
Transactions of firms with drastic
deviation
from
Carlsbergs
FV/Revenue and RV/EBITDA were not
taken into consideration.

Parameter values for DCF

Valuation
Organic sales rowth to remain stable
above 2.5% till 2014 and then will
start declining owing to limited
scope of expansion in
Russian/matured markets.
Driven by margin expansion in
Eastern Europe and a demand
recovery in Russia, operating margin
wil lreach close to 20% by 2014 and
then wil remain flat.
WACC of 8.8%, perpetual growth
rate : 1.5% and capping the
Debt/Capital ratio to 34.4%.

Choosing comparable companies for Trading

Multiple Valuation
Organic sales rowth to remain stable above 3% till
2014 and then will start declining owing to limited
scope of expansion in Russian/matured markets.
Driven by margin expansion in Eastern Europe and a
demand recovery in Russia, operating margin wil
lreach close to 20% by 2014 and then wil remain flat.
WACC of 8.8%, perpetual growth rate : 1.5% and
capping the Debt/Equity ratio to 30%.

LIMITATIONS OF VALUATION
METHODS
Discouted Cash
Flow
Closest to intrinsic
stock value
More bussiness
focused and lesser
influneced by
external volatile
factors.
Difficult to apply
when FCF are
negative
Estimates of cash
flow and earnings
could be subjected
to error sif time
period is far in
future.
Target is based on
terminal value
which is based on
estimate of
constant growth

Comparable
Company
Easy to access
data
Similar assets
having similar
value is
fundamentally
sound
Data is market
derived rather
assumed and
estimated on
future.
Tells about fair
stock prce but not
about fair takeover
price
Difficult to
incorporate
synergies or
chaning capital
structure.

Comparable
Transaction
No need to
estimate separate
takeover premium
as already its an
actual transaction.
Use of recent
transaction prices
reduces risk of
target
shareholders
lawsuit for
mispricing the
deal.
If past deal is over
or under valued it
is carried further.
Difficult to
incorporate
synergies or
chaning capital
structure.

FUNDING THE DEAL

We propose to maintain the Debt to Total Capital ratio of
SABMiller under 40% which is marginally higher than its original
debt to capital ratio of 36.3% so that its credit rating is
unaffected.
No. of new SABMiller shares to be issued will be 447 million,
taking the total No. of outstanding shares of SABMiller to 2029
million.
EPS of SABMiller before the merger is $ 1.88 whereas it is
New Company
Structure
increased to $ 2.07 after the merger, showing
that the
deal is Value
0.3978
accretive.
Debt to Total Capital
86
Deal Funding
Target Price
Debt Raised
Cash Paid
Equity Raised
No. of New Shares Issued

Value (in $
million)
30600
12240
2000
16360
447

SABMiller Stock Price(in GBP) 22.715

36.637
SABMiller Stock Price($)
1
No. of Shares
1582
57959.
Equity Value($)
89
Total Outstanding Shares
(After Merger)
2029

EPS Calculation
Value
Net Income(before merger) (in
$ million)
2971
Net Income(Carlsberg) (in $ 1234.4
million)
3
4205.4

SYNERGIES FROM THE DEAL

We expect SABMiller & Carlsbergs standalone revenues to
increase by 2% on account of access to new markets &
combination of brewing resources.
We expect Operating Margin to increase by 0.5% for both
SABMiller and Carlsberg on account of economies of scale and
operational efficiency.
SABMiller would benefit from increased access to emerging
markets of Carlsberg which is currently lacking in SABMillers
portfolio.
We expect the standalone firm value of SABMiller to increase
from $63.9 bn to $72.3 bn and that of Carlsberg to increase from
$26.6 bn to $34.2 bn, giving it a total synergy benefit of $16 bn.
The loss of volumes in the developed markets (especially North
America & UK) of SABMiller will be compensated by the growing
volumes in emerging markets of Carlsberg.

SYNERGIES SNAPSHOT
Revenue Effect - Carlsberg
100000
80000
60000
Revenue (in DKK million) 40000
20000

Carlsberg_Standalon
e
Carlsberg_with_Syner
gy

Revenue Effect - SABMiller

40000
35000
30000
25000
20000
Revenue (in $ million) 15000
10000
5000
0

Year

Revenue Synergy

in $ million

50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0

SABMiller_Standalon
e
SABMiller_with_Syner
gy

Year

Operating Profit Synergy

in $ million

12000
10000
8000
6000
4000
2000
0

BID STRUCTURE & EXECUTION

STRATEGY
Start with a friendly offer to Carlsbergs management
If not approved ready to raise the bid up to $33 billion since that is
the value based on transaction multiple of comparable companies.
If not approved buy shares directly from the open market.
If still not approved wait for the right opportunity instead of paying
too high a premium

MEASURES

MEASURES TO SELECT
ALTERNATIVE
Opportunity will be considered based on its capacity to accomplish the following
strategic goals of SABMiller:

Should maintain a major group EBITA from developing and emerging

economies. (>79% )
Reduction of exposure to matured markets with a declining growth
Should increase the proportion of total lager volume from markets in which
they have No. 1 or No. 2 market share positions.
Can be a developed country or developing country, with a scope of
growth in volumes and value
Can be achieved either through an Alliance or a Merger & Acquisition
Should increase the contribution to revenue growth from global and local
premium brands. (>7%)
Can be a new brand targeting special occasions or a different customer
segment
Should increase the EBITA growth, EBITA margin of local businesses and
should also be able to sustain it.
Should have a productive business capability program.
Benefit from collaboration & sharing of skills

Market
Shares:
Turkey-89%,
Russia-13%,
Khazaksthan-49%,
all in the Eurasia
region.
Overall
margin of
with 45% in

EBITDA
16.63%,
Turkey.

Operating capacity
of 35.2 million hl.
Incremental profit
addition of $1.21bn .
*

Acquire
remaining
80%
stake
in
BGI,
which enjoys a
leading position
in many African
markets.
Acquisition
gives
strong
foothold
for
SABMiller
in
Africa,
and
benefits from its
growing
beer
market
prospects.

FOSTERS

OTHERS

Europes
5th,
worlds 13th largest.
Sales Growth of
15%.

CASTEL
BGI

ANADOLU
EFES

ALTERNATIVES TO CARLSBERG

Leader
in
Australia, which is
having highest per
capita
beer
consumption.
Economy growing
at 3.4% annually.
Brazils
No.
2
beer
maker
Schincariol.
Acquisitions
in
Nigeria,
a
18
million
hl
beer
market with annual
growth rate of 9%.

Based on the publicly available data as on 30-June-2011. Rapid consolidation by

competitors has left very few large scale acquisition opportunities for SABMiller.

APPENDIX

DISCOUNTED CASH FLOW ANALYSIS CARLSBERG Standalone

DCF Valuation
(in DKK million)

2010

2011E

2012E

Net Sales

60055

63982

% of Growth

1.10%

6.50%

Operating Profit

10249

11500

Margin

17.07%

Tax

-1890

Tax rate on
EBIT(%)

18.44%

NOPAT

8359

9048

Depreciation

3987

4147

4313

% sales

6.64%

6.48%

6.48%

2013E

2014E

2015E

2016E

2017E

2018E

2019E

2020E

66605.2 68270.3 69977.1

72804.2
75374.6 76505.2 77652.8742
6
9
5
71376.7
3
74078.3
7
9
9
4.10%

2.50%

2.50%

2.00%

2.00%

1.75%

1.75%

1.50%

1.50%

12637.5 13090.0 13557.2 13828.3 14104.9 14351.7 14602.9 14821.9 15044.3165

5
3
4
8
5
9
4
9
4

17.97% 18.97% 19.17% 19.37% 19.37% 19.37% 19.37% 19.37% 19.37%

-2452

-2860

19.37%
3640.72460
3167.79 3280.85 3346.47 -3413.4 3473.13 3533.91 3586.92
4

21.32% 22.63% 24.20% 24.20% 24.20% 24.20% 24.20% 24.20% 24.20%

24.20%

9777.55 9922.24 10276.3 10481.9 10691.5 10878.6 11069.0 11235.0 11403.5919

3
4
9
1
5
5
3
7
4
4164.49 4268.60 4353.97 4441.05 4518.77 4597.85 4666.82 4736.82533
4
6
8
8
7
5
3
2
6.1%

6.1%

6.1%

6.1%

6.1%

6.1%

6.1%

6.1%

The cells marked in yellow are used

4581.51958
to
input -3575
the -3626corresponding
CAPEX
-3676 4027.95 4128.65 4211.23 4295.45 4370.62 4447.11 4513.81
3
parameter values for performing
%
sales
5.95%
5.67% 5.52% 5.90% 5.90% 5.90% 5.90% 5.90% 5.90% 5.90%
5.90%
sensitivity
analysis.
Working Capital

150

-300

% sales

0.25%

0.00%

0.45%

310.611497
273.082 279.909 285.507 291.217 296.313 301.499 306.021
2
0.40%

0.40%

0.40%

0.40%

0.40%

0.40%

0.40%

0.40%

DISCOUNTED CASH FLOWS

EBITDA margin
SENSITIVITYEquity
ANALYSIS
Value
improvement

1,39,910
.6

688.2
based on 11May2011

-0.30% -0.10%

0.00%

0.10%

0.30%

-1.50% 632.70 669.68 688.17 706.66 743.64

Revenue Growth
Improvement

as on
30June2011

-1.00%

632.70 669.68 688.17 706.66 743.64

-0.50%

632.70 669.68 688.17 706.66 743.64

0.00%
0.50%

632.70
632.70

Equity Value

639.21

0.00%

0.50%

1.00%

1.50%

1,39,910.55

1,54,055. 1,68,199. 1,82,344.

18
82
45
1,54,055. 1,68,199. 1,82,344.
18
82
45
1,54,055. 1,68,199. 1,82,344.
18
82
45

1,39,910.55
1,39,910.55

669.68 688.17 706.66 743.64

0.00%

1,25,765.
92

1,39,910.55

1,54,055. 1,68,199. 1,82,344.

18
82
45

669.68 688.17 706.66 743.64

0.50%

1,25,765.
92

1,39,910.55

1,54,055. 1,68,199. 1,82,344.

18
82
45

FCF Perpetual
Growth
1.00%

1.50%

FCF Perpetual
Growth

EV
2.00%

1,39,910
.6
0.50%

2.50%

1.00%

1.50%

2.00%

2.50%

Terminal
667.86
700.49Growth
737.99 781.53

8.70%

1,32,420.
46

1,36,803.75

1,41,795. 1,47,533. 1,54,195.

84
01
54

688.16699
8.75%
662.22 694.29 731.10 773.82

8.75%

1,31,628.
50

1,35,940.24

1,40,846. 1,46,480. 1,53,014.

69
03
70

1,30,846.
781.532
8.80%
14
1 737.987
9

1,35,087.82

1,39,910. 1,45,442. 1,51,852.

55
51
56

1,28,554.
662.217 694.285 731.104 773.815
8.95%
85
2
6
8
1
8.75% 634.036

1,32,595.04

1,37,177. 1,42,419. 1,48,473.

53
37
89

1,33,415.42

1,38,076. 1,43,412. 1,49,582.

22
50
57

8.70%
Tax-adjusted WACC

0.50%

-0.50%

-1.50% 1,25,765.
92
1,25,765.
-1.00%
92
1,25,765.
-0.50%
92

Revenue Growth
Improvement

WEIGHTED-AVERAGE COST OF CAPITAL ANALYSIS

688.2

EBITDA margin
improvement

EV

Rate

634.04

Tax adjusted 8.80%

WACC
8.95%
8.90%

628.92

74

618.88

1.00%

1.50%

2.00%

2.50%

Tax-adjusted
639.212 667.861 700.489
656.65 688.17 724.32 766.22
WACC

8.70%
613.95

0.50%

640.35 670.30 704.56 744.14

1,29,309.
628.922 656.645
724.323 766.219
8.90%
48
5
9 688.167
6
3
8.80%
645.72 676.18 711.06 751.38

Source: Company data, JP

8.95%
Morgan

613.946 640.353 670.304 704.564 744.136

8
2
1
5
6

618.878 645.715 676.177 711.055 751.382

9
2
9
6
8
8.90%

COMPARABLE COMPANY
ANALYSIS

FV (in US$ FV/Revenue(2 FV/Revenue(2 FV/EBITDA(2 FV/EBITDA(2 P/E(2011 P/E(2012

mn)
011)
012)
011)
012)
)
)
66240
2.7
2.5
10.5
9.7
17.5
15.7
41951
1.7
1.7
7.4
7
14.3
13
13636
1.93
1.83
12
11
19.4
16.9
12709
2.8
2.67
9.5
8.9
14.1
13
9333
1.3
1.3
8
7.5
12.3
11.6
6645
2.3
2.1
9.7
8.5
17.9
14.9
5768
3.14
2.96
12.1
11.4
18.7
16.5
16.314285 14.514285

2.267142857
2.151428571 9.885714286 9.142857143
71
71

Company name
SAB Miller
Heineken
Fortune brands
Constellation Brands
Molson Coors
Anadolu Efes
Campari

Mean

Carlsberg

Revenue
EBITDA
FV(Revenue)
FV(EBITDA)

2011(in DKK
mn)
63982
15646
145056.3343
154671.8857

2012(in DKK
mn)
66606
16947
143298.0514
154944

120050.8857

2011(in US$ 2012(in US$

mn)
mn)
12156.58
12655.14
2972.74
3219.93
27560.70351 27226.62977
29387.65829
29439.36

Source: JP Morgan PIB

Equity Value

22809.66829

COMPARABLE TRANSACTION
ANALYSIS
Year

Company name

Count
ry

FV (in US$ mn)

FV/Reven FV/EBIT
ue
DA

2010

Chongqing Brewery

China

2851

8.8

49.4

2010

Femsa

7532

2.34

10.9

2009

Orangina Schweppes

3871

2.6

2009

Tsingtao Brewery

3401

1.42

13

2009

Lion Nathan

5787

3.59

2008

Anheuser-Busch

59856

Source: JP Morgan
2008
Vin &PIB
Sprit

2008

Scottish & Newcastle

2007

Highligh
ted

Carlsberg in DKK mn in US$ mn

in DKK
mn

in US$ mn

12.2

Revenues

60055

11410.45

60055

11410.45

2.9

12.5

EBITDA

14236

2704.84

14236

2704.84

5625

5.05

20.8

FV(Revenu 245809.73 46703.849

e)
46
58
193377.1 36741.649

20080

2.49

13.6

FV(EBITDA 220528.58 41900.430

)
18
55
173679.2 32999.048

Glaceau

4100

11.8

2005

Bavaria

7714

4.08

9.4

2004

Coors

8319

1.41

8.4

2004

AmBev

11052

3.58

10.1

2004

Oriental Breweries

2059

3.15

10.1

Mean

4.0930769 15.4909
23
09

All

Equity Value

139058.2 26421.058

ARRIVING AT PROPOSED
VALAUTION
After valuing Carlsberg using the three methods, we considered
the following proportion to arrive at proposed deal value:
50% weight age to Comparable Transaction Multiples based Firm
Value
30% weight age to Comparable trading Multiples based Firm
Value
20% weight age to Discounted Cash Flow Analysis based Firm
Value
Firm Value

Overall Proposed Valuation

in DKK mn

in $ mn

20% of DCF

27982.11012

5316.600923

30% of Trading Multiple

50% of Transaction Multiple

46401.56571
86839.6

8816.297486
16499.524

Value 161223.2758 30632.42241

Equity
in DKK
mn
21057.910
12
36015.265
71
69529.1
126602.2
758

Value
in $ mn
4001.0029
23
6842.9004
86
13210.529
24054.43
241

DISCOUNTED CASH FLOW ANALYSIS SABMiller Standalone

DCF Valuation
(in $ million)

2010

2011E

2012E

2013E

2014E

2015E

2016E

2017E

2018E

2019E

2020E

Net Sales

21783

23177

24816

26382

% of Growth

1.10%

6.40%

7.07%

6.31%

Operating Profit

5262

5916

6515

7003

Margin

24.16%

Tax

-1084

Tax rate on
EBIT(%)

20.60%

NOPAT

4178

4662

5096

5427

5492.94 5685.19 5630.53 5771.29 5665.10 5778.40

3
6
1
4
3
5
5879.52672

Depreciation

655

694

715

737

823.118 851.927 877.485 899.422 919.659 938.052 954.468623

4
5
4
5
5
7
4

% sales

3.01%

2.99%

2.88%

2.79%

CAPEX

-1436

-1300

-1200

-1200

% sales

6.59%

5.61%

4.84%

4.55%

Working Capital

542

150

100

50

% sales

2.49%

0.65%

0.40%

Cash Flow for

DCF

3939

4206

4711

27437.2 28397.5 29249.5 29980.7 30655.3 31268.4 31815.6207

8
8
1
5
2
2
8
4.00%

3.50%

3.00%

2.50%

2.25%

2.00%

1.75%

7133.69 7383.37 7312.37 7495.18 7357.27 7504.42 7635.74898

3
2
8
8
6
2
7

25.53% 26.25% 26.54% 26.00% 26.00% 25.00% 25.00% 24.00% 24.00%

-1254

-1419

-1576

24.00%
1756.22226
1640.75 1698.18 1681.85 1723.89 1692.17 1726.02
7

21.20% 21.78% 22.50% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00%

23.00%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%
1749.85914
1371.86 1561.87 1608.72 1648.94 1686.04 1719.76
3
5.00%

5.50%

5.50%

5.50%

5.50%

5.50%

0.19%

0.25%

0.40%

0.40%

0.40%

0.40%

0.40%

0.40%

5014

4876

4862

4782

4902

4776

4872

4957

5.50%
127.262483
68.5932 -113.59 116.998 119.923 122.621 125.074
1

DISCOUNTED CASH FLOW ANALYSIS SABMiller with Synergy

DCF Valuation
(in $ million)

2010

2011E

2012E

2013E

Net Sales

21783

23177

24816

26382

1.10%

8.40%

9.07%

8.31%

5262

5916

6515

7003

% of Growth

2%

Operating Profit
Margin

0.5%

24.16%

2014E

2015E

2016E

2017E

2018E

2019E

27964.9 29502.9 30978.1 32372.1 33747.9 35097.8 36414.0629

2
9
4
6
7
9
6
6.00%

5.50%

5.00%

4.50%

4.25%

4.00%

-1419

3.75%

7410.70 7818.29 7899.42

8268.25 8598.98
4
3
6
8254.9
3
4
9103.51574

26.03% 26.75% 27.04% 26.50% 26.50% 25.50% 25.50% 24.50% 24.50%

-1254

2020E

25.00%

-1576 1704.46 1798.21 1816.87 1898.63 -1901.7 1977.77 2093.80862

Tax

-1084

Tax rate on
EBIT(%)

20.60%

NOPAT

4178

4662

5096

5427

5706.24 6020.08 6082.55 6356.27 6366.55 6621.21 7009.70711

2
5
8
3
5
7
9

Depreciation

655

694

715

737

838.947 885.089 929.344 971.164 1012.43 1052.93 1092.42188

6
7
2
7
9
7
9

% sales

3.01%

2.99%

2.88%

2.79%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

CAPEX

-1436

-1300

-1200

3.0%
2002.77346
-1200 1398.25 1622.66 -1703.8 1780.47 1856.14 1930.38
3

% sales

6.59%

5.61%

4.84%

4.55%

5.00%

5.50%

5.50%

5.50%

5.50%

5.50%

Working Capital

542

150

100

50

% sales

2.49%

0.65%

0.40%

0.19%

0.25%

0.40%

0.40%

0.40%

0.40%

0.40%

21.20% 21.78% 22.50% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00%

23.00%

5.50%
145.656251
69.9123 118.012 123.913 129.489 134.992 140.392
8
0.40%

DISCOUNTED CASH FLOW ANALYSIS Carlsberg with Synergy

DCF Valuation
(in DKK million)

2010

2011E

Net Sales

60055

63982 67884.9

1.10%

8.50%

10249

11500

% of Growth

2%

Operating Profit
Margin

0.5%

17.07%

2012E

6.10%

2013E

2014E

2015E

2016E

2017E

2018E

2019E

70939.7 74132.0 77097.2 80181.1 83187.9 86307.5 89328.2 92454.7790

2
1
9
8
8
3
9
9
4.50%

4.50%

4.00%

4.00%

3.75%

3.75%

3.50%

3.50%

12880.3 13814.6 14806.9 15784.7 16817.0 17863.6 18965.0 20075.4 21240.3807

5
6
8
5
4
2
5
7
8

18.47% 18.97% 19.47% 19.97% 20.47% 20.97% 21.47% 21.97% 22.47%

-2452

2020E

Tax

-1890

-2860

Tax rate on
EBIT(%)

18.44%

NOPAT

8359

9048

Depreciation

3987

4147

4313

% sales

6.64%

6.48%

6.35%

CAPEX

-3575

-3626

-3676

% sales

5.95%

5.67%

5.42%

Working Capital

150

-300

% sales

0.25%

0.00%

0.44%

3343.15 3583.29 3819.91 4069.72

-4323

22.97%

4589.54 4858.26 5140.17215

21.32% 22.20% 24.20% 24.20% 24.20% 24.20% 24.20% 24.20% 24.20%

24.20%

10020.3 10471.5 11223.6 11964.8 12747.3 13540.6 14375.5

16100.2086
5
1
9
4
2
3
1
15217.2
3
4327.32 4522.05 4702.93 4891.05 5074.46 5264.75 5449.02 5639.74152
3
3
5
2
7
9
6
4
6.1%

6.1%

6.1%

6.1%

6.1%

6.1%

6.1%

6.1%
5454.83196
4185.44 4373.79 4548.74 4730.69 4908.09 5092.14 5270.37
6
5.90%

5.90%

5.90%

5.90%

5.90%

5.90%

5.90%

0.40%

0.40%

0.40%

0.40%

0.40%

0.40%

0.40%

5.90%
369.819116
283.759 296.528 308.389 320.725 332.752 -345.23 357.313
4
0.40%

THANK
YOU