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

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)

Modelling multiperiod patterns in stock-market reactions to events, with an application to serial acquisitions

“…Our methodological contribution is a parsimonious hybrid of distributed lags and a spline that allows us to identify multiperiod post-event reaction patterns on the basis of two parameters, a shape parameter that identifies the post-event return pattern as either monotonic or whip-shaped, and a scaler that determines the sign and size of the reaction. In our application, we introduce this into the mean equation that comes with an augmented-GARCH variance equation, and we study the drop-and-recovery price pattern observed after takeover announcements by AB Inbev SA and Heineken (Doan and Sercu, 2020). The main competing hypotheses are a slowly resolved uncertainty about the deal's merits versus an indiscriminate but temporary distrust about the management's motives.…”

“…Our interest in within-window CAR patterns over such an intermediate horizon was actuated by Doan and Sercu (2020)'s study of takeovers by the brewing industry's two leading firms.…”

“…for Heineken in 2000-2018. Doan andSercu (2020-henceforth DS2020) find a drop-and-recover pattern that takes weeks (Heineken) or even months (AB Inbev). In a standard short-window test, only the initial drops would have been observed; the post-event recoveries would not have entered the picture at all.…”

California beer price posting: An exploratory analysis of pricing along the supply chain

“…The beer industry has been the focus of countless market structure and pricing studies, for example, Hellerstein (2008) and Goldberg and Hellerstein (2013) on exchange rate pass-through; Alviarez, Head, and Mayer (2021) and Doan and Sercu (2021) on multinational mergers and acquisitions ;Miller, Sheu, and Weinberg (2021) on oligopolistic price leadership and mergers; and Anderson (2023), Elzinga (2011), Elzinga, Tremblay, andTremblay (2015), andMcCullough, Berning, andHanson (2019) on changing market structures. But until now, access to granular level of data on production and distribution of small breweries has either been proprietary, such as on-premise sales data collected by brewers, or comes at a hefty cost, such as primary collected data (e.g., Hart, 2018;Staples et al, 2020) or scanner-level data collected by companies like Nielsen and IRI (see Volpe et al, 2016;Rojas and Peterson, 2008;Burgdorf, 2019).…”