Case Background
A large European Brewery (Company ‘A’ – based in Belgium) has recently made an acquisition in the United Kingdom of another smaller Brewery and its wholly owned subsidiary (Companies B and C collectively referred to as the ‘Consortium’). The European Brewery is now considering an IPO on a consolidated basis. They have appointed a Merchant Bank to underwrite the IPO and manage the process. Based on the information outlined herein and pursuant to an initial road-show the Merchant Bank has put out a Range of Offer Price between EURO 30 and EURO 38 per share.
Based on your understanding of the facts contained herein as well as on secondary research through publicly available resources please critique and comment on the following:
1. Analyze the historical financials of Company A based on the information presented in the exhibits. The analysis should include a) Commentary on historical growth trends b) Revenue and profitability analysis c) Analysis of key financial ratios of the Company
2. The Range of Offer Price: Present a critique on the Range of Offer Price proposed by the Merchant Bankers. You will need to undertake a valuation using different methods to arrive at the Range. In undertaking this analysis you may want to consider the following: a) Scenarios concerning the successful integration of the target with the parent. b) Typical IPO pricing discounts. c) Appropriate consolidation and applicability of discount rates would need to be considered. d) Please also comment on the relevance of different scenarios and different methods of valuation from the aforesaid perspective.
Successful integration of the Consortium with Company A would also result in pre-tax cost synergies of around EURO 150 million per annum. A few other important considerations which you may want to keep in mind include: