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

Published online by Cambridge University Press:  22 March 2021

Minh Phuong Doan  and
Piet Sercu Open the ORCID record for Piet Sercu [Opens in a new window]
Minh Phuong Doan
Affiliation:
Deakin University, School of Accounting, Finance and Economics, Deakin University, 221 Burwood Highway, Burwood, Victoria3125, Australia; e-mail: d.doan@deakin.edu.au.
Piet Sercu*
Affiliation:
AFI, Faculty of Economics and Business, KU Leuven, Naamsestraat 69, B-3000Leuven, Belgium
*
e-mail: piet.sercu@kuleuven.be (corresponding author).
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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)

Keywords

alphabrewingcosts of debtevent studymergers and acquisitionsstock returns
Type
Articles
Information
Journal of Wine Economics , Volume 16 , Issue 1 , February 2021 , pp. 32 - 55
Copyright
Copyright © American Association of Wine Economists, 2021

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Footnotes

We thank Karin Thorburn for guiding us to the literature, Phuong Doan Nguyen Trang, this journal's reviewer, and Karl Storchmann for constructive and insightful comments that have markedly improved both the interpretation and the redaction. All remaining errors are the responsibility of the authors.

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