Immersion Learning

Bud’s & Bonds: A Look at AB-INBev’s Proposed Acquisition of Modelo

by Brandon Mallette, MBA '14 (2/19/13)
Brandon Mallette, MBA '14

When I first decided that I wanted to go back to school to transition to a career in investment banking, one of the things that stood out about Johnson is the Investment Banking Immersion. Having no prior background in banking, I felt the Program would provide me with invaluable experience prior to my summer internship, which would differentiate me from other candidates.  Now, enrolled at Johnson and complete with the recruiting process, the Immersion is in full swing. 

Our first assignment following our visit to Wall Street focused on AB-INBev’s proposed acquisition of Modelo in a deal mainly funded by debt offerings. AB-INBev is the parent firm that owns the Budweiser brand, while Modelo is the maker of Corona. This case was particularly interesting to me, considering I will be heading to J.P. Morgan this summer to work in their Leveraged Finance group whereby I’ll be dealing almost exclusively with debt securities. For this case, we were tasked with presenting to the CFO of the hypothetical company MegaBev, Inc. the highlights of the AB-INBev deal and the specifics of their debt financings. The goal was to give the CFO an understanding of the acquisition financing market by using AB-INBev as a proxy for any deals that MegaBev is considering.

During preparation for the presentation, I was able to learn about different types of debt including bridge loans, how bond pricing is determined in the market, and how companies manage their debt profiles. We also had to assess the impact the bond issuances had on AB-INBev’s capital structure, their cost of capital, and how their financials stacked up versus competitors after they took on the additional leverage.

After completing the case, I now have a better understanding of the current state of the debt markets as well as the dynamics of different bond securities. I believe that assignments like this one will give me a leg up this summer and allow me to work on more challenging deals due to my preparation and confidence with investment banking concepts.  

On a last note, it was just announced last week that the Department of Justice is suing to block the merger transaction from taking place citing concerns about AB-INBev’s ability to raise prices as a result of the combination. Never a dull moment when it comes to being a banker!