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Mergers and Acquisitions Case Study - Essay Example

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An acquisition refers to instances in which one firm purchases another from its shareholders and gains control of the firm. The paper explores a recent merger and takeover activity within Australia and its impact on shareholder returns and some implications to the theory of the firm as evident in the results…
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Mergers and Acquisitions Case Study

Download file to see previous pages... The acquisition may generate monopoly gains whereby the purchasing a rival firm might minimize competition and enhance industry profits (Faulkner, Teerikangas and Joseph 2012, p.502). On August 17, 2010, SABMiller declared its intention to take its bid for Foster’s Group Ltd directly to the company’s shareholders. On December 16, 2011, SABMiller, one of leading brewers globally with more than 200 beer brands and over 70,000 workers in more than 75 countries, acquired Carlton and United Breweries (CUB) representing the Australian beverage business of Foster’s Group Limited. The court approval of the transaction preceded the entity's shareholders meeting, whereby the deal received the green light by 99.1% of current shareholders. The completion of the transaction scheme of arrangement can be regarded as a notable success given that SABMiller’s earlier proposal (June 2011) to acquire Foster’s Group for $4.90 per share became hostile in August 2011. In the approved transaction, Foster’s Group’s ordinary shareholders gained total cash consideration of A$5.40 per share, which represented an enterprise value of about Australia $11.7billion. In addition, to completing the acquisition of the firm, SABMiller also entered into a strategic alliance with Castle in Africa. Some of the means of gaining control of a public company entail a public offer (takeover bid) detailing gaining control of a listed public company. Recommended takeover can also be undertaken by: scheme and launching a dual listed company structure (Ahlstrom and Bruton 2010, p.190). A scheme demands a proposal to be tabled by the target to its shareholder and approved by the court. Court’s approval is critical as it...
This paper stresses that the acquisition was not difficult to integrate, and it is improbable that SABMiller would dispose the acquired firm. The paper has established that the acquisition heralded benefits to the SABMiller’s shareholders given that the acquisition aligned with the firm’s strategic priorities, and handed the firm with a leading position in the stable and profitable Australia beer industry. SABMiller expects Foster’s to become a critical part of its business via the application of its commercial capabilities and global scale, as well as by building on the initiatives put in place by Foster’s management. The acquisition of Foster’s is anticipated to be EPS enhancing for SABMiller within the first full year of ownership, and herald economic returns that may exceed the project WACC by year 5. These results align with takeovers being highly motivated by maximization of shareholder wealth. Public mergers and acquisition within Australia are guided by the overriding market activity and requires the regulation of recommended and hostile bids. The regulation encompasses undertaking of due diligence; procedures for announcing and launching an offer.
This report makes a conclusion that the acquisition of Foster’s Group Limited by SABMiller appears to be propelled by the objective of leveraging the synergies within the acquisition process. In order to keep up with growth and changes within the globalized economy, any entity has to pursue the path of growth that contains diverse challenges and issues and overcome them to become a success story. SABMiller, through its indirectly wholly-owned Australian subsidiary, acquisition of Foster’s can be regarded as a case mirroring a company following the path of success. ...Download file to see next pagesRead More
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