Abstract
In this paper, we will analyze, through four specific questions, the Brazilian beer merger between Brahma and Antarctica. In 1999, Brahma's CEO, named Marcel Telles, informed the firm's executives team about the negotiation of a possible merger with another Brazilian firm: Antarctica. The main objective of this assignment was to prepare a bargaining strategy to guide negotiations and conclude the deal.
The first part will focus on the estimation of the value of the different synergies and also determine intrinsic value per share of Antarctica (the target company). On the second part, it will determine the relative merits of cash and common stock as form of payment in this deal. Then, a share-to-share transaction will be brought in to find out the maximum exchange ratio in this condition. Moreover, we will enhance factors that determine the maximum and the minimum of this ratio. Finally, we will conclude with a description of deal design and some recommendations concerning this specific business case.
The merger with another firm enables to exploit a lot of opportunities as reinforcing its position in the market, creating economies of scale, sharing knowledge and know how. There are different mergers and acquisitions activity drivers. According to our business case between Brahma and Antarctica, we have faced rational managers and markets.
Brahma's managers pursue a competitive advantage to reach objectives in terms of market shares to become a "global total beverage company" in Latin America. In order to reach its objectives, Brahma has to take market shares from competitors as Antarctica.
