Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-10T23:01:48.006Z Has data issue: false hasContentIssue false
  • English
  • Français

Merging One's Way to the Top: AB Inbev versus Heineken

Published online by Cambridge University Press:  22 March 2021

Minh Phuong Doan  and
Piet Sercu Open the ORCID record for Piet Sercu [Opens in a new window]
Minh Phuong Doan
Affiliation:
Deakin University, School of Accounting, Finance and Economics, Deakin University, 221 Burwood Highway, Burwood, Victoria3125, Australia; e-mail: d.doan@deakin.edu.au.
Piet Sercu*
Affiliation:
AFI, Faculty of Economics and Business, KU Leuven, Naamsestraat 69, B-3000Leuven, Belgium
*
e-mail: piet.sercu@kuleuven.be (corresponding author).
Get access Rights & Permissions [Opens in a new window]

Abstract

Leuven's Den Hoorn brewery, now AB Inbev SA, has become the world's largest brewing group by far, but critics say the company overpaid for its acquisitions. In this article, we study typical stock market reactions to the many takeover announcements by AB Inbev and the industry's runner-up, Heineken. Unlike Heineken's, the market leader's takeover announcements were met by, on average, a –2% price reaction in the stock market in the announcement month, but most of that is already undone in the next month. For Heineken, the same pattern shows up, only faster: the V-shaped reaction takes a few weeks rather than a few months. Such V-reactions may actually reflect a temporary rise in uncertainty rather than overpaying. The finding that reactions are reversed and heterogeneous across firms, raises issues of interpretation and optimal test design of event studies. (JEL Classifications: G12, G14, G17)

Keywords

alphabrewingcosts of debtevent studymergers and acquisitionsstock returns
Type
Articles
Information
Journal of Wine Economics , Volume 16 , Issue 1 , February 2021 , pp. 32 - 55
Copyright
Copyright © American Association of Wine Economists, 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We thank Karin Thorburn for guiding us to the literature, Phuong Doan Nguyen Trang, this journal's reviewer, and Karl Storchmann for constructive and insightful comments that have markedly improved both the interpretation and the redaction. All remaining errors are the responsibility of the authors.

References

Ahern, K., Daminelli, D., and Fracassi, C. (2015). Lost in translation? The effect of cultural values on mergers around the world. Journal of Financial Economics, 117(1), 165–189.CrossRefGoogle Scholar
Aktas, N., de Bodt, E., and Roll, R. (2011). Serial acquirer bidding: An empirical test of the learning hypothesis. Journal of Corporate Finance, 17(1), 18–32.CrossRefGoogle Scholar
Aktas, N., de Bodt, E., and Roll, R. (2013). Learning from repetitive acquisitions: Evidence from the time between deals. Journal of Financial Economics, 108(1), 99–117.CrossRefGoogle Scholar
Bertrams, K., Del Marmol, J., Geerts, S., and Poelmans, E. (2019). Becoming the World's Biggest Brewer. Artois, Piedboeuf, and Interbrew (1880–2000). Oxford, UK: Oxford University Press.CrossRefGoogle Scholar
Dybvig, P. H., and Ross, S. A. (1985). The analytics of performance measurement using a security market line. Journal of Finance, 40, 401–416.CrossRefGoogle Scholar
Eckbo, E. (ed.) (2008). Handbook of Corporate Finance: Empirical Corporate Finance. Vol. 2. Amsterdam: Elsevier/North-Holland.Google Scholar
Eckbo, E. (2009). Bidding strategies and takeover premiums: A review. Journal of Corporate Finance, 15, 149–178.CrossRefGoogle Scholar
Eckbo, E. (2014). Corporate takeovers and economic efficiency. Annual Review of Financial Economics, 6, 51–74.CrossRefGoogle Scholar
Eckbo, E., and Thorburn, K. S. (2000). Gains to bidder firms revisited: Domestic and foreign acquisitions in Canada. Journal of Financial and Quantitative Analysis, 35(1), 1–25.CrossRefGoogle Scholar
The Economist (2019a). 3G Capital discovers the limits of cost cutting and debt. March 2, lead article. Available at https://www.economist.com/leaders/2019/03/02/3g-capital-discovers-the-limits-of-cost-cutting-and-debt.Google Scholar
The Economist (2019b). Trouble brewing. Brewers at AB Inbev need to rethink its strategy? May 11, Business section. Available at https://www.economist.com/business/2019/05/11/brewers-at-ab-inbev-need-to-rethink-its-strategy.Google Scholar
Elzinga, K. E. (2011). The U.S. beer industry: Concentration, fragmentation, and a nexus with wine. Journal of Wine Economics, 6(3), 217–230.CrossRefGoogle Scholar
Elzinga, K. E., Horton Tremblay, C., and Tremblay, V. J. (2015). Craft beer in the United States: History, numbers, and geography. Journal of Wine Economics, 10(3), 242–274.CrossRefGoogle Scholar
Fama, E. F., and French, K. R. (1992). The cross-section of expected stock returns. Journal of Finance, 47(2), 427–465.CrossRefGoogle Scholar
Fama, E. F., and French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3–56.CrossRefGoogle Scholar
Fama, E. F., and French, K. R. (2012). Size, value, and momentum in international stock returns. Journal of Financial Economics, 105(3), 457–472.CrossRefGoogle Scholar
Francis, B. B., Hasan, I., and Sun, X. (2008). Financial market integration and the value of global diversification: Evidence for US acquirers in cross-border mergers and acquisitions. Journal of Banking and Finance, 32(8), 1522–1540.CrossRefGoogle Scholar
Graham, J. R., and Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2–3), 187–243.CrossRefGoogle Scholar
Hart, J. (2018). Drink beer for science: An experiment on consumer preferences for local craft beer. Journal of Wine Economics, 13(4), 429–441.CrossRefGoogle Scholar
Holmes, A., and Anderson, K. (2017). Convergence in national alcohol consumption patterns: New global indicators. Journal of Wine Economics, 12(2), 117–148.CrossRefGoogle Scholar
Jensen, M. C. (1969). Risk, the pricing of capital assets, and the evaluation of investment portfolios. Journal of Business, 42(2), 167–247.CrossRefGoogle Scholar
Malatesta, P. H., and Thompson, R. (1985). Partially anticipated events: A model of stock price reactions with an application to corporate acquisitions. Journal of Financial Economics, 14(2), 237–250.CrossRefGoogle Scholar
Mills, T. C. (2018). Is there convergence in national alcohol consumption patterns? Evidence from a compositional time series approach. Journal of Wine Economics, 13(1), 92–98.CrossRefGoogle Scholar
Moeller, S. B., and Schlingemann, F. P. (2005). Global diversification and bidder gains: A comparison between cross-border and domestic acquisitions. Journal of Banking and Finance, 29(3), 533–564.CrossRefGoogle Scholar
Poelmans, E., and Swinnen, J. (2011). From monasteries to multinationals and back: An economic history of beer. Journal of Wine Economics, 6(2), 196–216.CrossRefGoogle Scholar
Roll, R. (1986). The Hubris Hypothesis of corporate takeovers. Journal of Business, 59(2, part 1), 197–216.CrossRefGoogle Scholar
Sercu, P., and Van Hulle, C. (1995). On the structure of take-over models, and insider-outsider conflicts in negotiated take-overs. Journal of Banking and Finance, 19(1), 11–44.CrossRefGoogle Scholar
Swinnen, J., and Briski, D. (2017). How Beer Explains the World. Oxford: Oxford University Press.Google Scholar
Thorburn, K. (2019). Structuring mergers and acquisitions. NHH course notes. Bergen, Norway: Norwegian School of Economics.Google Scholar
Williamson, O. (1964). The Economics of Discretionary Behavior: Managerial Objectives in a Theory of the Firm. Englewood Cliffs, NJ: Prentice Hall.Google Scholar