CHAPTER 20
EBITDA
Down but Not Out
 
Arjan J. Brouwer
University of Amsterdam and PricewaterhouseCoopers
Benton E. Gup
Chair of Banking, University of Alabama
 
 
On June 12, 2008, Belgian-Brazilian InBev S.A. published the terms of its initial unsolicited bid for Anheuser-Busch Company of the United States. InBev wanted to pay $47.5 billion, which “represents 12x Anheuser-Busch’s 2007 EBITDA.”1 On July 14, 2008, Anheuser-Busch agreed to be taken over for $70 per share in cash. InBev presented the transaction value as $62 billion and stated that the implied enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 12.4 was in line with comparable transactions in the industry.2 InBev financed the transaction primarily with borrowed funds that will be repaid largely from the divestiture of noncore assets from both companies and by temporarily reducing cash dividends. The noncore assets include the Anheuser-Busch theme parks—Busch Gardens, SeaWorld, and others.3
This transaction is interesting from many perspectives. Not only does the combination of the two firms result in the world’s largest beer company and the third largest consumer products company after Procter & Gamble and Nestlé, but the transaction is one of the examples of the increasing involvement of other economies (Europe, Asia, Middle East) in the U.S. capital market. Companies from these countries bring their own governance, business, and valuation practices and reporting ...

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