The Best Beer Company in a Better World - Anheuser-Busch InBev

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74 | Annual Report 2008 Financial Report The following transactions took place in 2008 : Acquisition of Anheuser-Busch On 18 November, InBev has completed the acquisition of Anheuser-Busch, following approval from shareholders of both companies. Anheuser-Busch’s results are included within the company’s results from 18 November 2008. The combination creates the global leader in beer and one of the world’s top five consumer products companies. Effective the date of the closing, InBev has changed its name to AB InBev to reflect the heritage and traditions of Anheuser-Busch. Under the terms of the merger agreement, all shares of Anheuser-Busch were acquired for 70 US dollar per share in cash for an aggregate amount of approximately 52.5b US dollar or 40.3b euro. AB InBev financed the merger with funds drawn under the new senior and equity bridge facilities (see note 25 Interest bearing loans and borrowings). On 18 December the 9.8b US dollar equity bridge facility was reimbursed with the proceeds of the issuance of 986 109 272 new AB InBev shares (6.36b euro). In line with the company’s risk management policy, AB InBev has matched sources (share issuance in euro) and uses of proceeds (reimbursement of 9.8b US dollar equity bridge facility) by pre-hedging its exposure to the foreign exchange rate between the euro and the US dollar at an average all-in-rate of 1.5409 US dollar per euro. The cost of the transaction reaches approximately 0.9b euro (1.2b US dollar) of which 0.2b euro are allocated to goodwill, 0.1b euro relates to the capital increase, 0.1b euro relates to the senior and equity bridge facilities commitment fees and equity bridge facility arrangement fees and are reported in the 2008 income statement and 0.5b euro relates to the senior facility arrangement fees and will be taken in the income statement as an accretion expense over the remaining life time of the financing using the effective interest rate method. Furthermore, as per the terms set in the merger agreement, AB InBev will assume some 2008 pre-merger obligations. These obligations are estimated at 52m euro (68m US dollar) of which 8m euro are accrued in the opening balance sheet and will be settled in cash and of which 44m euro will be settled in AB InBev options. The grant is subject to the approval of the AB InBev shareholders at the shareholders’ meeting of 28 April 2009 without any future accounting impact, if approved. Should the grant not be approved, the entire obligation would have to be settled in cash and would result in an adjustment to the opening balance sheet of 44m euro. The company is in the process of finalizing the allocation of the purchase price to the individual assets acquired and liabilities assumed in compliance with IFRS 3. The provisional allocation of the purchase price included in the 2008 balance sheet and detailed in the table below is based on the current best estimates of AB InBev’s management and is based principally on valuations prepared by independent valuation specialists. The completion of the purchase price allocation may result in further adjustment to the carrying value of Anheuser-Busch’s recorded assets and liabilities and the determination of any residual amount that will be allocated to goodwill. The following table presents the provisional allocation of purchase price to the Anheuser-Busch business as of 18 November 2008 : Million euro Before Purchase Price Allocation Purchase Price Allocation After Purchase Price Allocation Non-current assets Property, plant and equipment 6 742 1 783 8 525 Goodwill 926 (926) - Intangible assets 487 16 242 16 729 Investment in associates 3 163 2 250 5 413 Trade and other receivables 165 (15) 150 Current assets Income tax receivable 274 (29) 245 Inventories 855 86 941 Trade and other receivables 958 9 967 Assets held for sale 16 - 16 Cash and cash equivalents 378 - 378 Minority interests (37) - (37) Non-current liabilities Interest-bearing loans and borrowings (5 810) 1 010 (4 800) Employee benefits (1 316) - (1 316) Provisions (90) (23) (112) Deferred tax liabilities (973) (8 083) (9 057) Current liabilities Trade and other payables (2 258) (166) (2 423) Net identified assets and liabilities 3 481 12 138 15 619 Goodwill on acquisition 24 661 Consideration paid in cash 40 280
Financial Report Annual Report 2008 | 75 The transaction resulted in 24.7b euro goodwill provisionally allocated primarily to the US business on the basis of expected synergies. The valuation of the property, plant and equipment, intangible assets, investment in associates, interest bearing loans and borrowings and employee benefits is based on the valuation performed by independent valuation specialist. The other assets and liabilities are based on the current best estimates of AB InBev’s management. The majority of the intangible asset valuation relates to brands with indefinite life. The valuation of the brands with indefinite life is based on a series of factors, including the brand history, the operating plan and the countries in which the brands are sold. The brands with indefinite life include the Budweiser family (including Bud and Bud Light), the Michelob brand family, the Busch brand family and the Natural brand family and have been fair valued for a total amount of 16 473m euro. Distribution agreements and favorable contracts have been fair valued for a total amount of 256m euro. These are being amortized over the term of the associated contracts ranging from 3 to 18 years. The valuation of the investment in associates (including Modelo) was performed considering the share price and exchange rate prevailing on the 18 th of November. For the investment in Tsingtao, the valuation was adjusted considering the expected consideration on the disposal of the 19.9 % stake in Tsingtao announced on 23 January 2009. A deferred tax liability has been accrued on most fair value adjustments considering a tax rate of 39 %. As of the completion date of the acquisition, Anheuser-Busch contributed 1.46b euro to the revenue and 45m euro to the profit of AB InBev. If the acquisition date had been 1 January 2008 it is estimated that AB InBev’s revenue and normalized profit from operations 1 would have been higher by 10.4b euro and 2.1b euro, respectively. The pro-forma data include certain purchase accounting adjustments such as the estimated changes in depreciations and amortization expenses on acquired tangible and intangible assets. However the pro-forma results do not include any anticipated cost savings or other effects of the planned integration of Anheuser-Busch. Accordingly, such amounts are not necessarily indicative of the results if the combination had occurred on 1 January 2008 or that may result in the future. As a result of the United States of America (‘US’) antitrust review of the transaction AB InBev’s subsidiary InBev USA, LLC will cease to act as the exclusive importer of Labatt branded beer (which includes primarily Labatt Blue and Labatt Blue Light) (‘Labatt Beer’) in the US for Labatt Brewing Company Limited, a wholly owned subsidiary of AmBev. Accordingly, a consent final judgment filed in the US District Court for the District of Columbia sets forth that LBCL will grant to an independent third-party (‘Licensee’) a perpetual and exclusive license to : (i) market, distribute and sell Labatt Beer for consumption in the US, (ii) brew such Labatt Beer in the US or Canada solely for sale for consumption in the US, and (iii) to use the relevant trademarks and intellectual property in connection therewith; and LBCL will brew and supply to Licensee the Labatt Beer for an interim period not to exceed three years. The specific terms and conditions of the license agreement and the supply agreement will be negotiated with the Licensee and approved by the US Department of Justice (see note 35 Events after the balance sheet date). Separately, in order to ensure that AmBev is adequately compensated, AB InBev has also agreed to indemnify AmBev in connection with certain events related to the implementation of the consent final judgment. In 2007 approximately 1.7m hectoliters of Labatt Beer were sold in the US. The impact of such transactions on earnings is not material to AB InBev’s overall business. Other transactions • The company acquired several local distributors throughout the world. As these distributors are immediately integrated in the AB InBev operations, no separate reporting is maintained on their contributions to the AB InBev profit. Goodwill recognized on these transactions amounted to 58m euro. • In January 2008, AmBev reached an agreement for the purchase of the Cintra brands. The finalization of the purchase accounting for the 2007 business combination with Cintra resulted in the recognition of intangible assets for an amount of 6m euro. In May 2008, the Cintra brands were sold. • The 32m euro cash inflow from disposals results from the sale of two wholesalers in Western Europe and from the partial collection of the remaining receivable from the sale of Immobrew in 2007. 1 Disclosure of profit for 2008 on a pro-forma basis has not been deemed practical given that significant judgment would have been required in connection with non-recurring items and finance cost incurred by both AB InBev and the acquiree.
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Our dream is to become The Best Bee
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Anheuser-Busch InBev is a publicly
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Global brands Multi-country brands
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Success in China China is the large
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World-class efficiency World-class
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Business Service Center Excellence
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Fewer bigger bets We know focus wor
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Stella Artois Légère In 2008, we
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Contacts Registered office Anheuser
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