Sun Brewing Analysis

1546 Words Aug 4th, 2015 7 Pages
1. Did Interbrew add value to SUN brewing? How?

The Khemka family is evaluating multiple scenarios to decide what future action they
want to proceed with in regards to their stake in SUN Interbrew. The Khemka family has
identified their options and we are providing a discounted cash flow analysis to bestow insight
as to what option is best. The income and cash flow projections as well as the balance sheet for
Sun Interbrew (found in Exhibits 1 and 2, respectively) were used as a base for calculations.
The assumptions necessary to evaluate the company are detailed in Exhibit 3 and are stated
below for simplicity. The revenue growth was assumed to be 14.7% and the discount rate and
expense growth rate to be 12% and 0% respectively.
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The assets, which
consisted of two additional breweries, aided in achieving economies of scale. Additionally, the
location of the assets expanded regional coverage in the burgeoning Russian market. When
combined with SUN Brewing’s management talent, the joint venture experienced significant
growth in both market share and overall revenues. In turn, this growth led to the acquisition of
two additional breweries, bringing the total to nine in the country.

Lastly (and probably most importantly), Interbrew provided SUN with economic cover
during the NATO bombing of Serbia and Montenegro. Investors are notoriously reluctant to
invest precious and scarce capital resources in unstable regions. What mustn’t be lost is the
significance of the role that Russia played in protesting the NATO’s presence and influence in
the region. The fact that they (Russia) were holding a position contrary to an organization that
constitutes 70% of the world’s defense spending is more than enough reason to give any
investor pause. SUN benefitted tremendously from the stable foundation Interbrew was able to
provide during that turbulent time.

2. What was SUN Interbrew’s Total Enterprise Value as of July 31st, 2004?

Using a 12% discount rate, the Total Enterprise Value of Sun Interbrew was calculated
to be $3.05 billion as July 31
, 2004. This…