• Total consideration – USD 122bn as per the WSJ article on 15 September 2014. We assume that this amount refers to SABMiller’s enterprise value, not equity value. This would imply a take-out price of GBP 44 per share. On the assumption that the USD 122bn consideration related to an equity value, this would imply a value per share of GBP 48.
• Disposals – US and China for 10x and 16x EBITDA, respectively.
• Synergies – USD 2bn by F19, with equal phasing over four years. This equates to approximately 10.5% of net sales after disposals (on net sales of approximately USD 19bn) vs BUD deal 12% and Modelo deal 20%.
• Tax rate 25% – assume some synergy vs SABMiller tax rate 27%.
• Interest coupon 5% – for a fully loaded debt transaction.
• ABI net debt – we assume that the buy-back programme that we have factored into our model does not happen.
• WACC hurdle rate of 7.9%.
Accretive deal, but struggles to cover its cost of capital On our calculations, the deal would be c17% accretive by year 3, assuming no issuance of shares, however the return on invested capital evolution would look less attractive, with the company struggling to become EVA® positive by year 8 (7.3% vs WACC 7.9%). We believe the company’s internal target is to meet the cost of capital by year 3; however, for certain acquisitions (eg, China) we believe that the company would be more flexible.