SUN Brewing (B) Harvard Case Solution & Analysis

SUN Brewing (B) Case Solution 

Introduction

The case has its roots in the field of merger and acquisition of a particular company; it discusses the importance of acquiring the company through various processes in order to achieve an optimal result. From the case, SUN group was an international investment entity that was involved in almost every industry, it was considering potential benefits of investing in Russia and therefore opened its subsidiary named SUN Brewing, and the entity was responsible for expansion of brewery products in Russia.

In 1999, SUN Brewing was merged with the most successful Belgian company(Interbrew) and set the consolidated operations in Russia, however the agreement was only for five years until maturity and invalid after termination. Therefore, Khemka family (Owner of SUN Brewing) critically assessed the pros and cons of the acquisition.

Before termination, Interbrew announced to merge with one of the top brands globally (AmBev). Thus, it was looking to expand the business in every region where they operated and for the opportunity to enter the Latin American market for expansion of its business. The decision was quite favorable to Interbrew because it would secure the operations through heavy capital investments in the company.

On the other side, Alpha group was interested to take control of SUN Brewing in order to expand operations into different regions in the world. Although this proposal was an opportunity for Khemka because it would reduce the level of risk but the main problem was that it had no control in the decision making of the company.

So all these proposed decisions had made the Khemka family confused because they were not considered a part of the organization due to few shares. So it involved in various analysis in order to retain or exit the company’s operations.

Importance of SUN Brewing for Interbrew

From a historical perspective, it was analyzed that SUN Brewing had increased its market position in Russia, so this was an opportunity for Interbrew to retain its control within the company because it could allow cross selling of the products into different regions worldwide. In contrast, it was also an opportunity for SUN brewing to build a relationship with Interbrew and to retain an advantage of high capital raise given by the counter party.

The most important factor for Interbrew to take control of the company was to increase the size of operations by merging with AmBev and to secure the future hurdles caused by the potential threat of liquidity problems. So in order to maintain the position in SUN Brewing, Interbrew was looking to increase the shares powers by purchasing more voting right shares, in order to involve in major decisions of the company. Which would allow them to make certain decisions regarding operational efficiency and to expand the business reputation globally.

Sun Interbrew financial analysis

From the following results, it has been analyzed that Sun Interbrew was considering distributing the power of business to different shareholders under voting rights. It was determined that Alpha group and Interbrew had made the proposal of taking control of the company in order to expand the business operations into different regions of the globe.

 However, they critically evaluated the expected performance of Sun Interbrew for the future, thus various processes were applied in order to know the expected results and prices of stock and to give information to existing, as well as potential shareholders regarding the benefit to hold the share or withdraw due to negative consequences.

Projected income statement

From the results, it has been identified that the expected sales volume of Sun Interbrew would tend to increase by 33.5% consistently. Whereas the cost of sales would be approximately 60% of sales due to the high consuming product line and the demand of brewery in Russia................

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