UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
(Amendment
No. 2)
SCHEDULE
13E-3
Rule
13e-3
Transaction Statement
under
Section 13(e) of the Securities Exchange Act of 1934
QUILMES
INDUSTRIAL (QUINSA) SOCIÉTÉ ANONYME
(Name
of
Subject Company (issuer))
QUILMES
INDUSTRIAL S.A.
(Translation
of Issuer’s Name into English)
QUILMES
INDUSTRIAL (QUINSA) SOCIÉTÉ ANONYME
(Name
of
Filings Persons (identifying status as offeror, issuer or other
person))
Registered
Office: 84, Grand Rue L-1660 Luxembourg
Registered
Number: RCS Luxembourg B 32501
Class
B
Common Shares, without par value
American
Depositary Shares, each of which represents two (2) Class B Shares, without
par
value, evidenced by American Depositary Receipts
(Title
of
Class of Securities)
74838Y20
(CUSIP
Number)
Miguel
Gomez Eiriz
Chief
Financial Officer
84,
Grand Rue L-1660 Luxembourg,
Grand-Duchy
of Luxembourg.
(352) 47
38 85
(Name,
Address and Telephone Number of Person
Authorized
to Receive Notices and Communications)
________________
WITH
COPIES TO:
Diane
G. Kerr
Davis
Polk & Wardwell
450
Lexington Avenue
New
York, New York 10017
(212) 450
4000
(Name,
address and telephone number of person authorized to receive notices and
communications on behalf of the bidder)
This
statement is filed in connection with (check the appropriate box):
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a)
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[
] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c)
under
the Securities Exchange Act of 1934.
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b)
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[
] The filing of a registration statement under the Securities
Act of 1933.
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Check
the
following box if the solicitation materials or information statement referred
to
in checking box (a) are preliminary
copies: [ ]
Check
the
following box if the filing fee is a final amendment reporting the results
of
the transaction: [ ]
Calculation
of Filing Fee
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Transaction
Value
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Amount
of Filing Fee
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$385,596,349.00
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n/a
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*
Set
forth the amount on which the filing fee is calculated and state how it was
determined.
[
ü
]Check
the box if any
part of the fee is offset as provided by the Exchange Act Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number,
of the Form or Schedule and the date of its filing.
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Amount
Previously Paid:
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$11,837.81
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Form
or Registration Number:
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Schedule
TO-T
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Filing
Party:
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Companhia
de Bebidas das Américas - AmBev
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Date
Filed:
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12-28-07
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This
Amendment No. 2 to the
Rule 13E-3 Transaction Statement filed by Quilmes Industrial (Quinsa),
Société Anonyme (“Quinsa” or the “Company”) on January 14, 2008 (such Statement
as amended by Amendment No. 1 thereto filed by Companhia de Bebidas das Américas
– AmBev (“AmBev” or the “Offeror”) on January 16, 2008 and by this Amendment No.
2, the “Transaction Statement”) relates to the offer by AmBev to purchase any
and all outstanding Class A Shares and Class B Shares (including Class B
Shares
held as American Depositary Shares (“ADSs”)) of the Company that are not owned
by AmBev or its affiliates upon the terms and subject to the conditions set
forth in the Offer to Purchase, including all schedules thereto, and in the
related Letters of Transmittal filed by the Offeror on December 28, 2007
(which,
as amended or supplemented from time to time, together constitute the “Offer to
Purchase”). The information set forth in the Offer to Purchase and in
the Schedule TO-C filed by the Offeror on December 26, 2007, is, where specified
herein, expressly incorporated by reference in response to items of the
Transaction Statement, and is supplemented by the information specifically
provided herein. Capitalized terms defined in the Offer to Purchase
and used herein without definition shall have the meanings specified in the
Offer to Purchase.
FORWARD-LOOKING
STATEMENTS
This
Transaction Statement , the
documents incorporated by reference and the documents to which Quinsa refers
contain statements that are or may constitute forward-looking statements.
These
statements appear throughout this Transaction Statement and include statements
regarding our intent, belief or current expectations, including but not limited
to any statements concerning:
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our
corporate
strategy;
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our
expectations regarding our
future performance, revenues, income, earnings per share, capital
expenditures, dividends, liquidity and capital
structure;
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our
development of new
products;
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the
demand for beer, soft drinks
and water;
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the
supply and availability of
barley and malt;
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trends
affecting our financial
condition or results of operations;
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our
future
performance;
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our
dividend
policy;
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possible
future repurchases of our
stock;
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the
future impact of competition
and regulation;
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political
and economic conditions
in the countries in which we or our affiliates operate or may operate
in
the future;
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any
statements preceded by,
followed by or that include the words “believes”, “expects”, “predicts”,
“anticipates”, “intends”, “estimates”, “should”, “may” or similar
expressions; and
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other
statements contained or
incorporated by reference in this
Transaction
Statement
regarding matters
that are not
historical facts.
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Because
such statements are subject to risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to:
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uncertainties
relating to
political and economic conditions in
Argentina
and the other countries of
Latin
America
where we
conduct our business;
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the
rate of inflation and exchange
rate risks, particularly, increases in the exchange rate of the Argentine
peso or of the local currencies of other countries in which we operate,
against the U.S. dollar;
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restrictions
on the ability to
exchange local currencies in the markets where we do business into
hard
currencies;
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the
adoption of a restrictive
currency transfer policy in the countries where we conduct our
business;
and
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the
nature and extent of future
competiti
on in our
principal markets.
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Due
to extensive and rapid changes in
laws as well as economic and business conditions in most of the countries
where
Quinsa owns assets, it is difficult to predict the impact of such changes
on
Quinsa’s financial condition. You should not place undue reliance on such
statements, which speak only as of the date that they were made. Quinsa’s
independent public accountants have not examined or compiled the forward-looking
statements and, accordingly, do not provide any assurance with respect to
such
statements. These cautionary statements should be considered together with
any
written or oral forward-looking statements that Quinsa may issue in the
future.
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND
EFFECTS.
The
first paragraph of the supplemental disclosure for this Item 7 entitled “Purpose
of the Offer” is amended to read as follows:
Purpose
of the Offer.
According to the Offer to Purchase, the purpose of the Offer is to acquire
any
and all of the outstanding Class A shares and Class B shares of the Company
(including Class B shares held as ADSs) that are not owned by AmBev or its
affiliates. According to the Offer to Purchase, the acquisition
transaction has been structured as a cash tender offer and the Offeror did
not
consider any alternatives to the Offer. As the Offer is structured as
a voluntary tender offer, each unaffiliated security holder may make its
own
decision as to whether to participate in the Offer, and no shareholder approval
is required. The Offeror did not discuss with Quinsa, its management
or its directors the terms of the Offer or any other acquisition transaction
prior to announcing the Offer.
ITEM 8. FAIRNESS OF THE TRANSACTION.
The
supplemental disclosure for this Item 8 is amended and restated in its entirety
to read as follows:
During
the
week prior to AmBev’s announcement that it intended to make the Offer,
representatives of AmBev informed certain members of Quinsa’s management that
AmBev was considering entering into discussions with certain of Quinsa’s
shareholders with respect to the possibility of AmBev making a tender offer
for
the Quinsa shares not owned by AmBev and of such shareholders agreeing to
tender
their shares in the offer. AmBev did not disclose to Quinsa any
proposed terms of the possible offer and did not request any information
from
Quinsa or solicit any recommendation or advice from Quinsa or the
Board.
On
December 21, 2007, AmBev announced that its board of directors had approved
a
plan to make the Offer and that Arnhold and S. Bleichroeder Advisers, Punch
Card
Capital and Duma Capital Partners (collectively, the “Shareholder Group”) had
agreed to sell their shares, totaling a 3.22% economic interest in Quinsa
.
On
December 28, 2007, AmBev commenced the Offer.
Purpose
and Effects of the Offer
AmBev
has
indicated in the Offer to Purchase that its purpose and plan is to acquire
all
of the Quinsa shares and ADSs that it does not already own and thereafter
for
Quinsa to delist its Class A shares and its Class B shares from the LSE,
to
delist its ADSs from the NYSE, to terminate its ADS facility and, as and
when
permitted by applicable law and regulation, to terminate the registration
of the
Class B shares under the Exchange Act. If AmBev purchases shares or
ADSs pursuant to the Offer, the liquidity of the Class A shares not tendered
in
the Offer may be substantially reduced and the liquidity of the Class B shares
and the ADSs not tendered in the Offer will be substantially
reduced. The Shareholder Group is obligated under the terms of its
agreements with AmBev to tender all of the shares it owns (as of January
4,
2008, approximately 43% of the Class B shares not owned by AmBev and its
affiliates) in the Offer. Consequently, even if no other Class B
shares were tendered, there would be an over 40% reduction in the market
liquidity of the Class B shares. Moreover, unless the Shareholder
Group breaches its obligations under its agreements with AmBev or certain
other
customary conditions fail to be satisfied, AmBev is obligated to buy the
Shareholder Group’s shares even if the Offer is terminated and no shares are
purchased thereunder.
The
agreements between AmBev and the Shareholder Group prohibit members of the
Shareholders Group from purchasing Quinsa shares for a period of five years
from
the date of the sale of their shares to AmBev. Based on filings on
Schedule 13D made by the Shareholder Group, it appears that members of the
Shareholder Group have been active buyers of the Company’s
shares. Upon the closing of the transactions contemplated by the
agreements between the Shareholder Group and AmBev, these shareholders may
no
longer act as buyers for shares held by shareholders who elect not to tender
their shares in the Offer.
It
is a
decision of the Board to delist the Class A shares and the Class B shares
from
the LSE, to delist the ADSs from the NYSE, to terminate the ADS facility
and, as
and when permitted by applicable law and regulation, to terminate the
registration of the Class B shares under the Exchange Act, and shareholders
should be aware that AmBev controls all appointments to the Board. If
Quinsa’s shares and
ADSs
are
delisted from the LSE and the NYSE, there may be no organized trading market
for
the Company’s securities. Delisting of the ADSs from the NYSE and
termination of the registration of the Class B shares under the Exchange
Act
would terminate the Company’s obligation to publicly disclose financial and
other information regarding its business, its obligation to have independent
directors on the Board, its obligation to maintain an audit committee and
its
obligation to comply with the Sarbanes-Oxley Act, certain requirements of
Luxembourg law and other rules and regulations.
Except
as
described in the Offer to Purchase and in this Statement, Quinsa has no plans,
proposals or negotiations which relate to or would result in (i) any significant
change in the working conditions of the employees of the Company or its
subsidiaries, (ii) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company, (iii) any purchase,
sale or
transfer of a material amount of assets of the Company, (iv) any material
change
in the Company’s present dividend policy, or (v) any other material change in
the Company’s business.
Position
of Quinsa Regarding the Offer
The
Board
met on December 28, 2007 and again on January 14, 2008 to consider the
Offer.
The
December 28 Meeting
Promptly
after AmBev’s press release dated December 21, 2007, the Board began a process
to put itself in a position to advise its shareholders on the Offer and to
recommend whether shareholders should tender their shares in the
Offer.
On
Friday,
December 28, 2007, the Board met to review the announcements made by AmBev
with
respect to the Offer as reflected in AmBev’s press releases dated December 21,
2007 and December 28, 2007 and to select and engage a financial adviser and
legal counsel to advise the Board in connection with its consideration of the
Offer. All of the directors were present. The Board
reviewed a proposal from Citigroup Global Markets Inc. (“Citigroup”) that, among
other matters, disclosed Citigroup’s engagement by the Board in connection with
the tender offer made by AmBev for the Company’s shares in 2007 and the
engagements of Citigroup by AmBev and its affiliates. The Board
reviewed the fact that, in 2007, it had concluded that Citigroup’s prior
relationships with AmBev as of that time did not impair Citigroup’s judgment or
ability to render a fairness opinion to the Board. In particular, the
Board reviewed that it had previously considered the past relationship between
Citigroup and AmBev, including the fact that Citigroup had prepared a report
in
2006 on behalf of AmBev, and that it also had considered the nature of that
relationship, the identity of the persons involved, the scope of the overall
relationship between Citigroup and AmBev as compared to those existing between
AmBev and other investment banking firms having the expertise to provide the
service being requested of Citigroup, and the terms upon which Citigroup was
prepared to render its services. At the December 28 meeting, the
Board reviewed the nature and scope of each engagement or relationship entered
into between Citigroup and AmBev since the time of the Board’s prior analysis
including the fact that Citigroup had acted as a joint bookrunner in a $161
million international bond issuance by an AmBev subsidiary in July
2007. The board also discussed Citigroup’s extensive prior knowledge
of the Company, its expertise in the Company’s industry and its experience in
advising the Board. After taking all of these factors into
consideration, the Board determined to retain Citigroup. The Board
also decided to retain Davis Polk & Wardwell, as U.S. counsel, and Elvinger,
Hoss & Prussen, as Luxembourg counsel, in connection with the
Offer.
The
January 14 Meeting
On
January
14, 2008, the Board met to review the Offer. All of the directors were present.
The Board reviewed and discussed the terms of the Offer.
Following
this discussion, Citigroup, the financial institution selected by the Board
to
act as its financial adviser in connection with the Offer, made a presentation
to the Board reflecting the valuation analysis that Citigroup had done for
purposes of evaluating the Offer and delivering to the Board an opinion with
respect to the fairness, from a financial point of view, of the consideration
proposed to be paid in the Offer. After completing its presentation, Citigroup
delivered to the Board its written opinion, dated January 14, 2008, to the
effect that, as of the date of the opinion and based on and subject to various
assumptions and limitations described in the opinion, (i) the consideration
offered to holders of Class A shares in the Offer is fair, from a financial
point of view, to the holders of Class A shares and (ii) the consideration
offered to holders of Class B shares (including those held in the form of ADSs)
in the Offer is fair, from a financial point of view, to the holders of Class
B
shares, in each case other than AmBev and its affiliates. A summary of
Citigroup’s written opinion is set forth below.
Recommendation
of the Board of Directors of the Company
After
careful consideration and discussion, at the January 14, 2008 meeting, the
Board
unanimously:
(a)
determined that the Offer is fair to the Company’s shareholders other than AmBev
and its affiliates; and
(b)
decided to recommend that shareholders tender their shares in the
Offer.
Reasons
for the Board’s recommendation
In
unanimously determining that the Offer is fair and recommending that
shareholders tender their shares in the Offer, the Board considered a number
of
factors, including, but not limited to, the factors described
below:
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Citigroup’s
financial presentation and analysis, including its opinion, dated
January
14, 2008, to the Board as to the fairness from a financial point
of view
(as of the date of the opinion) of the consideration offered to holders
of
Class A shares and Class B shares (including those represented by
ADSs) in
the Offer, as more fully described in the section below under the
heading
“Opinion of Citigroup Global Markets Inc.”, which financial presentation
and analysis was adopted by the Board. The full text of Citigroup’s
opinion, which sets forth the assumptions made, general procedures
followed, matters considered and limitations on the review undertaken,
is
attached hereto as Exhibit (c)(i) and is incorporated herein by reference.
Citigroup makes no recommendation to any shareholder regarding how
such
shareholder should vote or act on any matters relating to the Offer.
Holders of Class A shares and Class B shares are urged to
read the
Citigroup opinion carefully and in its
entirety
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The
Offer price is the result of an arms length negotiation between AmBev
and
three of the Company’s largest shareholders, none of whom are affiliated
with AmBev;
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As
of December 21, 2007, the last full trading day before AmBev’s
announcement of the Offer, to Quinsa’s knowledge, the Offer price
represented the highest price per share ever paid for the Company’s stock
in an open market transaction on either the NYSE or the LSE or in
a
privately negotiated transaction since the Company has been listed
on the
LSE and the NYSE;
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The
Offer price represents a premium of 21.25% over the last reported
ADS
price, 21.16% over the last reported Class B share price and 21.27%
over
the last reported Class A share price on December 21, 2007, the last
full
trading day before AmBev’s announcement of the
Offer;
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As
of December 21, 2007, the last full trading day before AmBev’s
announcement of the Offer, the Offer price represented a 4.05% premium
over the then highest reported price for the ADSs on the NYSE ($78.09
on
July 9, 2007);
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As
of December 21, 2007, the last full trading day before AmBev’s
announcement of the Offer, the Offer price represented a 9.78% premium
over the then highest reported trading price for the Company’s Class B
shares on the LSE ($37.00 on April 3,
2007);
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As
of December 21, 2007, the last full trading day before AmBev’s
announcement of the Offer, the Offer price represented a 4.10% premium
over the then highest trading price ever recorded for the Company’s Class
A shares on the LSE ($3.90 on March 29,
2007);
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The
Offer price falls within the range of fairness under each valuation
methodology employed by Citigroup;
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There
is limited market liquidity for the Company’s shares and this liquidity
will be reduced as a result of the terms of the agreements between
AmBev
and the Shareholder Group because, with limited exceptions, these
agreements require the Shareholder Group to sell its shares to AmBev
even
if no shares are tendered pursuant to the Offer and prohibit the
Shareholder Group from buying the Company’s shares for five
years;
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The
members of the Board who are not employees of AmBev and its affiliates
have unanimously agreed with the actions taken by the Board as a
whole;
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The
Board retained counsel not affiliated with AmBev to represent it
in
connection with its consideration of the
Offer;
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AmBev
has indicated that it has plans for Quinsa to delist the Class A
shares
and the Class B shares from the LSE, to delist the ADSs from the
NYSE, to
terminate the ADS facility and, as and when permitted by applicable
law
and regulation, to terminate the registration of the Class B shares
under
the Exchange Act. If these actions are taken, there may not be
any organized trading market in which shareholders who elect not
to tender
their shares may later dispose of their shares. Accordingly,
the Board therefore concluded that the Offer represents a good opportunity
for the Company’s shareholders other than AmBev and its affiliates to
tender their shares in the Offer;
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Shareholders
who wish to retain an investment in Quinsa may do so by investing
the
proceeds of the Offer in AmBev or
InBev;
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The
Offer provides the Company’s shareholders who are considering selling
their Class A shares or Class B shares with the opportunity to sell
their
shares at the Offer price without incurring the transaction costs
typically associated with market sales;
and
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The
consideration to be paid to the Company’s shareholders consists entirely
of cash.
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Substantive
Fairness
. The Board considered both the substantive fairness of
the Offer to shareholders other than AmBev and its affiliates and the procedural
fairness of the Offer to these shareholders before reaching a final conclusion
that the Offer as a whole is fair and deciding to recommend that shareholders
tender their shares in the Offer. The principal factors that the
Board considered when assessing substantive fairness were the Citigroup
financial presentation and analysis, the Citigroup fairness opinion and the
amount of the Offer price as compared to historical trading prices of the
Company’s stock prior to AmBev’s announcement of the Offer. In
finding the Offer substantively fair, the Board also took into
account
the fact that, even if the Offer were terminated (without any shares being
purchased thereunder) the number of shares remaining in the hands of
unaffiliated shareholders would be reduced by more than 40%. Finally,
the Board noted that the consideration to be paid to the Company’s shareholders
consists entirely of cash. In view of these factors and the
information available to it as set out above, the Board concluded that it did
not need to take any additional steps in order to reach its conclusion as to
the
substantive fairness of the Offer.
Procedural
Fairness
. In evaluating the procedural fairness of the Offer,
the Board considered the fact of the absence of a special committee of
directors, the fact that neither Quinsa nor the Board nor any representatives
of
either entered into any negotiations with AmBev on behalf of the unaffiliated
shareholders, the fact that a majority of the Board members are affiliates
of
AmBev and the fact that the Board appoints all of Quinsa’s senior
management. Nevertheless, the Board concluded that the Offer is
procedurally fair because the Offer price was established in a negotiation
between three of the Company’s largest unaffiliated shareholders and
AmBev. In addition, the Offer is a voluntary Offer. Each
shareholder may make its own decision as to whether to participate in the Offer
and AmBev has not proposed any “squeeze-out” transaction following the
Offer. The Board also retained a financial adviser that does not have
material relationships with AmBev or its affiliates to evaluate the Offer and
to
advise it as to the fairness, from a financial point of view, of the
consideration being offered to shareholders. Finally, while the Board
determined not to form a committee of independent directors, the Board retained
counsel independent of AmBev to guide it in its consideration of the Offer
and
ultimately all of the directors, including all of the Company’s independent
directors, concluded that the Offer is fair. In view of these factors
and the information available to it as set out above, the Board concluded that
it did not need to take any additional steps in order to reach its conclusion
as
to the procedural fairness of the Offer.
Explanation
of Factors Considered by the Board
. Citigroup’s financial
presentation and analysis and Citigroup’s opinion, as well as the favorable
comparisons of the Offer price to the various historical trading prices of
the
Company’s shares and the fact that the Offer price is payable in cash supported
the Board’s conclusion as to the fairness of the Offer because these factors
support the conclusion that the consideration being offered to the Company’s
shareholders is fair from a financial point of view. In the opinion
of the Board, the factors relating to the anticipated limited market liquidity
for the Company’s shares and AmBev’s stated plans for Quinsa also support the
Board’s fairness conclusion because these factors indicate that future liquidity
opportunities for Quinsa’s shares will decrease
dramatically. Consequently, shareholders who elect not to tender
their shares in the Offer will hold securities for which there may be a very
limited, or possibly no, organized trading market. Moreover, much of
the decrease in liquidity will occur even if the Offer is terminated (without
any shares being purchased thereunder) due to the agreements between AmBev
and
the Shareholder Group. The Board analyzed the fact that, currently,
the Company’s shareholders already have a very limited ability to realize value
on their Quinsa shares, that the members of the Shareholder Group have been
among the more active purchasers of the Company’s stock during recent months and
that the terms of the agreements between the Shareholder Group and AmBev
prohibit the Shareholder Group from acquiring additional Company shares for
a
period of 5 years from the time the Shareholder Group sells its shares to
AmBev. The Board concluded that, under these circumstances,
shareholders who fail to tender their shares in the Offer will find it even
more
difficult in the future to realize liquidity on their investment in the Company
and that a sale price that equals or exceeds the Offer price might be hard
to
achieve. The Board concluded that participating in the Offer would be
a good opportunity for shareholders to obtain a fair price, without paying
customary transaction costs, and avoid the risk of being locked into their
investment in the Company.
Several
of
the factors listed above were relevant to the Board’s fairness determination
because they supported the Board’s conclusion with respect to the procedural
fairness of the Offer. By retaining counsel not affiliated with
AmBev, the Board had the assistance of legal advisers having no conflict of
interest with AmBev. As a result, the Board was in a position to
receive unbiased advice of counsel with
respect
to
matters such as the responsibilities of the Board to Quinsa and its shareholders
in connection with the Offer. The fact that the Offer price resulted
from a negotiation between AmBev and the Shareholder Group also was relevant
to
the Board’s determination of both procedural and substantive
fairness. The shareholder Group is comprised of three institutional
investors, none of whom are affiliated with AmBev. The Board
concluded that the Shareholder Group had the incentive to negotiate the highest
possible Offer price and the best possible Offer terms from AmBev and that
the
Board had no reason to believe that this negotiation was other than an arms
length negotiation between unrelated parties. The Board further
concluded that the fact that the Shareholder Group was able to negotiate
directly with AmBev, in essence, provided the Company’s unaffiliated
shareholders with a disinterested representative in the negotiation of the
Offer
price and other terms.
The
Board
considered the support for the Boar’s actions by the independent directors on
the Board as a factor favoring fairness because these directors do not have
the
potential conflicts of interest that might be felt by members of the Board
who
are affiliates of AmBev. Finally, in determining fairness, the Board
considered as a relevant factor the ability of shareholders to retain an
investment in Quinsa by investing the proceeds of the Offer in either AmBev
or
In Bev because the Board believed that this reinvestment opportunity should
reduce any sentiment on the part of the Company’s shareholders that, due to the
liquidity risks described above, they are effectively being coerced into giving
up their investment in the Company.
General
. When
assessing the conclusions and recommendations of the Board contained in this
Statement, shareholders should be aware that the Board is comprised of seven
persons all of whom have been appointed by AmBev and that the AmBev controlled
Board appoints all of the members of the Company’s senior
management. Of these directors, (i) three are related to AmBev
(either as employees, officers, directors or subsidiaries of AmBev), (ii) three
are independent (as such term is defined under the Sarbanes Oxley Act of 2002)
and (iii) one director is a former officer of AmBev. All of these
directors participated in the analysis and review of the Offer and voted in
favor of determining that the Offer is fair, from a financial point of view,
to
the Company’s shareholders other than AmBev and its affiliates and in
recommending that its shareholders tender their shares in the Offer. The Board
decided not to establish a special committee for the purposes of evaluating
the
fairness of the Offer or engaging in any negotiations with AmBev. No
such action is required by Luxembourg law.
The
directors of the Company who are employees or nominees of AmBev, may have
divided loyalties. As directors their obligation is to act in the best interest
of the Company and its shareholders. However, as AmBev employees or nominees,
these directors may have loyalties to AmBev as well. Shareholders should take
this potential for divided loyalties into account in assessing the Board’s
recommendation with respect to the Offer.
When
evaluating the Offer and the recommendation of the Board with respect to it,
shareholders also should be aware that, while the Company retained counsel
different from counsel representing AmBev to provide separate legal advice
to
the Company and its directors in connection with the Offer, counsel to Quinsa
did not report to the independent directors separately or to persons
unaffiliated with AmBev and counsel to Quinsa did not engage, on behalf of
the
Company’s minority shareholders, in any independent negotiations with AmBev or
AmBev’s counsel regarding the transaction or the Offer
price. Furthermore, counsel to Quinsa did not participate in
negotiations between AmBev and the Shareholder Group. Apart from the
Board retaining Citigroup as its financial adviser as described in this
Schedule, none of Quinsa, the Board (including the independent directors of
the
Company) or any of their respective representatives hired any separate adviser
to prepare a report concerning the fairness of the Offer.
The
Offer
price was determined by AmBev and the Shareholder Group, without consultation
with the Board or Quinsa. None of Quinsa, the Board or any or their
respective representatives made any effort to negotiate any increase in the
Offer price. Quinsa did not consider any alternatives to the
Offer.
The
foregoing discussion of the factors considered by the Board in connection with
the transaction is not intended to be exhaustive but is believed to include
all
material factors considered by it. The Board did not assign any specific weights
to the factors listed above. Rather, its fairness determination and
recommendation to shareholders was made after consideration of all of the
foregoing factors as a whole.
With
respect to the Board’s determination of the fairness of the Offer, the Board did
not consider the Company’s liquidation value. Liquidation value
assumes the Company would cease operations, with its value resulting from the
sum of the individual assets to be sold. Intangible assets unable to
be sold, such as goodwill, would not be captured in the determination of
liquidation value. The Board does not believe this to be relevant
precisely because more substantial value results from the Company continuing
to
operate and any liquidation would destroy that value. The Board does
not have any present intention to liquidate the Company in the foreseeable
future and AmBev has stated in the Offer to Purchase that it does not have
any
such intention. Therefore, the Board did not seek any appraisal of
liquidation value for purposes of valuing the Class A shares of the Class B
shares and the Board believes that the liquidation value of the Company is
irrelevant to a determination as to whether the Offer is fair to the
shareholders of the Company other than AmBev and its affiliates. The
Board also did not consider net book value, which is an accounting concept,
as a
factor because the Board believed that net book value is not a material
indicator of the value of the Company as a continuous operation but ration
is
indicative of historical costs. The Company’s net book value as of
December 31, 2006, calculated by dividing shareholders’ equity by the number of
shares outstanding, was $0.64 per Class A share and $6.40 per Class B
share. This value is only 15.8% of the Offer price for the Class A
shares and the Class B shares. The Board did not consider going
concern value because it does not believe that going concern value is a viable
method of valuation for a transaction such as the Offer. Going
concern valuation is a specific method of determining the value of a business
by
using the revenues of previous years to project future revenues, and it assumes
that such revenues will remain unchanged. Given the volatility in the
economies and market condition of the countries in which Quinsa’s subsidiaries
conduct their business, which have impacted Quinsa’s past performance
significantly, Quinsa believes that assuming that such revenues will remain
unchanged in the future would not produce an accurate and realistic value for
the Company. Consequently, the Board did not consider going concern
valuation as a viable method of valuation for the Offer.
Certain
Projections
Summary
Financial Projections — In Nominal US$ Million
The
table
below sets forth a summary of the financial projections prepared by the
Company’s management for fiscal years 2008 through 2017.
1
These projections were provided by
the Company’s management to Citigroup to assist Citigroup in its
analysis.
|
|
Projected
Fiscal Year Ending
December 31,
|
|
08E-17E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenues
|
$1,521.1
|
|
$1,635.6
|
|
$1,746.1
|
|
$1,805.3
|
|
$1,866.2
|
|
$1,927.8
|
|
$1,988.3
|
|
$2,049.2
|
|
$2,113.4
|
|
$2,179.6
|
|
4.1%
|
|
COGS
|
626.3
|
|
662.7
|
|
711.2
|
|
737.4
|
|
765.0
|
|
791.9
|
|
819.7
|
|
847.1
|
|
876.6
|
|
907.0
|
|
4.2%
|
|
SG&A
|
333.1
|
|
337.9
|
|
333.7
|
|
342.8
|
|
347.9
|
|
355.5
|
|
362.2
|
|
373.1
|
|
383.2
|
|
392.4
|
|
1.8%
|
|
EBITDA
|
$561.8
|
|
$635.0
|
|
$701.1
|
|
$725.2
|
|
$753.3
|
|
$780.4
|
|
$806.5
|
|
$829.0
|
|
$853.6
|
|
$880.2
|
|
5.1%
|
|
Depreciation
and
Amortization
|
58.8
|
|
74.6
|
|
88.7
|
|
102.0
|
|
115.0
|
|
127.3
|
|
138.6
|
|
149.4
|
|
160.3
|
|
171.5
|
|
12.6%
|
|
EBIT
|
$503.0
|
|
$560.4
|
|
$612.4
|
|
$623.2
|
|
$638.3
|
|
$653.1
|
|
$667.8
|
|
$679.6
|
|
$693.3
|
|
$708.7
|
|
3.9%
|
|
Capex
|
173.8
|
|
216.9
|
|
182.4
|
|
201.4
|
|
189.9
|
|
177.4
|
|
163.5
|
|
160.2
|
|
165.2
|
|
171.5
|
|
(0.1%)
|
|
Revenue
Growth
|
|
|
7.5%
|
|
6.8%
|
|
3.4%
|
|
3.4%
|
|
3.3%
|
|
3.1%
|
|
3.1%
|
|
3.1%
|
|
3.1%
|
|
|
|
EBITDA
Growth
|
|
|
13.0%
|
|
10.4%
|
|
3.4%
|
|
3.9%
|
|
3.6%
|
|
3.3%
|
|
2.8%
|
|
3.0%
|
|
3.1%
|
|
|
|
EBIT
Growth
|
|
|
11.4%
|
|
9.3%
|
|
1.8%
|
|
2.4%
|
|
2.3%
|
|
2.3%
|
|
1.8%
|
|
2.0%
|
|
2.2%
|
|
|
|
EBITDA
Margin
|
36.9%
|
|
38.8%
|
|
40.2%
|
|
40.2%
|
|
40.4%
|
|
40.5%
|
|
40.6%
|
|
40.5%
|
|
40.4%
|
|
40.4%
|
|
|
|
EBIT
Margin
|
33.1%
|
|
34.3%
|
|
35.1%
|
|
34.5%
|
|
34.2%
|
|
33.9%
|
|
33.6%
|
|
33.2%
|
|
32.8%
|
|
32.5%
|
|
|
|
Cash
&
Equivalents
|
$396.3
|
|
$260.2
|
|
$319.3
|
|
$232.7
|
|
$169.4
|
|
$119.4
|
|
$139.3
|
|
$176.6
|
|
$220.1
|
|
$268.6
|
|
|
|
Loans
and
Financing
|
179.0
|
|
141.6
|
|
106.8
|
|
75.1
|
|
44.2
|
|
0.0
|
|
0.0
|
|
0.0
|
|
0.0
|
|
0.0
|
|
|
|
Net
Debt
|
(217.3)
|
|
(118.6)
|
|
(212.5)
|
|
(157.6)
|
|
(125.2)
|
|
(119.4)
|
|
(139.3)
|
|
(176.6)
|
|
(220.1)
|
|
(268.6)
|
|
|
|
Shareholders’
Equity
|
796.9
|
|
813.3
|
|
996.8
|
|
1,033.8
|
|
1,071.7
|
|
1,110.4
|
|
1,150.1
|
|
1,190.7
|
|
1,232.1
|
|
1,274.5
|
|
|
|
Total
Assets
|
1,809.6
|
|
1,848.1
|
|
2,025.6
|
|
2,051.7
|
|
2,077.1
|
|
2,090.9
|
|
2,149.5
|
|
2,211.3
|
|
2,274.5
|
|
2,338.1
|
|
2.9%
|
Key
Assumptions
The
financial projections set forth
above were prepared based on the consolidated budget and three-year plan of
the
Company for the period ended December 31, 2010 (the “Three Year
Plan”). The projections for fiscal years 2011 through 2017 were
prepared assuming a sustained growth rate for all of the Company’s operations
throughout the period based on the same strategic premises as contemplated
by
the Three Year Plan. Other key assumptions utilized in connection
with the preparation of these projections include the following:
|
·
|
The
Company’s lines of business and principal locations of operations remain
unchanged;
|
|
·
|
Growth
in sales is achieved primarily through growth in the size of the
beverages
market, with volume sales growth for years 2008 through 2010 assumed
to be
in the range of 6% to 8% per year;
|
|
·
|
Strong
growth in the beverages markets in the countries in which Quinsa
operates;
|
|
·
|
Price
increases are in line with expected levels of inflation in the countries
where Quinsa operates;
|
|
·
|
Growth
in net revenue results primarily from higher sales volumes and these
price
increases and is assumed to be at a compounded annual growth rate
of 4%
for the period from 2008 through
2017;
|
____________
1
Based
on proportional consolidation of
the stake held by Quilmes International (Bermuda) Ltd. (“QIB”) in each operating
subsidiary and assuming 100% consolidation of QIB.
|
·
|
Reduction
in costs and expenses sufficient to cause EBITDA margins to grow
from
36.9% in 2008 to 40.4% in 2017;
|
|
·
|
Capital
expenditures at the level necessary to support the assumed growth
and
achieve assumed cost savings;
|
|
·
|
Argentine
inflation rates of 11.3%, 10.1%, 10.5%, 9.5%, 8.5%, 5.0%, 3.0%, 3.0%,
3.0%
and 3.0% for years 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2105,
2016
and 2017;
|
|
·
|
Average
exchange rate of U.S. dollars per Argentine peso: US$3.37,
US$3.64, US$3.95, US$4.25, US$4.53, US$4.66, US$4.71, US$4.76, US$4.80
and
US$4.85 for years 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2105,
2016 and
2017; and
|
|
·
|
Real
GDP growth in Argentina of 5.2%, 3.0%, 3.5%, 3.5%, 3.5%, 3.0%, 3.0%,
3.0%,
3.0% and 3.0% for years 2008, 2009, 2010, 2011, 2012, 2013, 2014,
2105,
2016 and 2017.
|
Shareholders
should be aware that
financial projections used or prepared by the Company’s management are
predictions of, or indicate, future events and future trends which do not relate
to historical matters and are based on current plans, estimates and projections,
and therefore undue reliance should not be placed upon them. Such financial
projections involve inherent risks, uncertainties and assumptions. If
these risks or uncertainties ever materialize or the assumptions prove
incorrect, or if a number of important factors occur or do not occur, actual
results may differ materially from those expressed or
implied.
Opinion
of Citigroup Global Markets Inc.
Citigroup
was retained by the Company to act as financial adviser to the Board in
connection with the Offer. In connection with this engagement, at a meeting
of
the Company’s board of directors held on January 14, 2008 to evaluate the
transaction, Citigroup rendered its oral opinion, which was confirmed by
delivery of a written opinion dated the same date, to the effect that, as of
the
date of the opinion and based upon and subject to the considerations and
limitations set forth in the opinion, (i) the consideration offered to holders
of Class A shares in the Offer is fair, from a financial point of view, to
the
holders of Class A shares and (ii) the consideration offered to holders of
Class
B shares in the Offer is fair, from a financial point of view, to the holders
of
Class B shares, in each case other than AmBev and its affiliates.
The
full
text of Citigroup’s opinion, which sets forth the assumptions made, general
procedures followed, matters considered and limitations on the review
undertaken, is attached hereto as Exhibit (c)(i). The summary of Citigroup’s
opinion set forth below is qualified in its entirety by reference to the full
text of the opinion.
Holders of Class A shares and Class B shares are
urged to read the Citigroup opinion carefully and in its
entirety.
Citigroup’s
opinion was limited solely to the fairness of the consideration from a financial
point of view as of the date of the opinion. Citigroup provided its advisory
services and opinion for the information and assistance of the Board in
connection with its consideration of the Offer. Neither Citigroup’s opinion nor
the related analyses constituted a recommendation of the Offer to the Board.
Citigroup makes no recommendation to any shareholder regarding how such
shareholder should vote or act on any matters relating to the
Offer.
In
arriving at its opinion, Citigroup:
|
·
|
reviewed
the Offer to Purchase;
|
|
·
|
held
discussions with certain senior officers, directors and other
representatives and advisers of the Company concerning the business,
operations and prospects of the
Company;
|
|
·
|
examined
certain publicly available business and financial information relating
to
the Company; examined certain financial forecasts and other information
and data relating to the Company, which were provided to or discussed
with
Citigroup by the Company’s
management;
|
|
·
|
reviewed
the financial terms of the Offer as set forth in the Offer to Purchase
in
relation to, among other things, current and historical market prices
and
trading volumes of Class B shares, and the Company’s historical and
projected earnings and other operating data, capitalization and financial
condition of the Company;
|
|
·
|
considered,
to the extent publicly available, the financial terms of certain
other
transactions which Citigroup considered relevant in evaluating the
Offer;
|
|
·
|
analyzed
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose operations Citigroup
considered relevant in evaluating those of the Company;
and
|
|
·
|
conducted
such other analyses and examinations and considered such other information
and financial, economic and market criteria as Citigroup deemed
appropriate in arriving at its
opinion.
|
In
rendering its opinion, Citigroup assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or provided to or otherwise reviewed
by
or discussed with it and upon the assurances of the Company’s management that
they were not aware of any relevant information that was omitted or that
remained undisclosed to Citigroup. With respect to financial forecasts and
other
information and data relating to the Company provided to or otherwise reviewed
by or discussed with Citigroup, Citigroup was advised by the Company’s
management that such forecasts and other information and data were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company’s management as to the future financial performance of
the Company. Citigroup assumed, with the Company’s consent, that the Offer will
be consummated in accordance with the terms described in the Offer to Purchase,
without waiver, modification or amendment of any material term, condition or
agreement and that, in the course of obtaining the necessary regulatory or
third
party approvals, consents and releases for the Offer, no delay, limitation,
restriction or condition will be imposed that would have an adverse effect
on
the Company or the Offer. Citigroup has assumed that there are no distinctions
between the Class A shares and Class B shares (other than that each Class B
share equals 10 Class A shares), and with the Company’s consent has not
conducted any investigation with respect to the relative rights applicable
to
the different classes of shares.
Citigroup
did not make, and it was not provided with, an independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise, of the Company,
and did not make any physical inspection of the properties or assets of the
Company. Citigroup was not requested to, and it did not, solicit
third party indications of interest in the possible acquisition of all or a
part
of the Company. Citigroup expresses no view as to, and Citigroup’s
opinion does not address, the relative merits of the Offer as compared to any
alternative business strategies that might exist for the Company or the effect
of any other transaction in which the Company might engage. Citigroup
also expresses no view as to, and the Citigroup opinion does not address, the
fairness (financial or otherwise) of the amount or nature or any other aspect
of
any compensation to any officers, directors or employees of Quinsa or AmBev,
or
any class of such persons, relative to the consideration offered to the holders
of the Class A shares and the Class B shares in the
Offer. Citigroup’s
opinion is necessarily based upon information available to Citigroup, and
financial, stock market and other conditions and circumstances existing, as
of
the date of the opinion.
In
preparing its opinion, Citigroup performed a variety of financial and
comparative analyses, including those described below. The summary of
these analyses is not a complete description of the analyses underlying
Citigroup’s opinion. The preparation of a financial opinion is a
complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application
of
those methods to the particular circumstances and, therefore, a financial
opinion is not readily susceptible to summary description. Citigroup
arrived at its ultimate opinion based on the results of all analyses undertaken
by it and assessed as a whole, and did not draw, in isolation, conclusions
from
or with regard to any one factor or method of analysis for purposes of its
opinion. Accordingly, Citigroup believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors
or
focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying its analyses and
opinion.
In
its
analyses, Citigroup considered industry performance, general business, economic,
market and financial conditions and other matters existing as of the date of
its
opinion, many of which are beyond the control of the Company. No
company, business or transaction used in those analyses as a comparison is
identical to the Company, and an evaluation of those analyses is not entirely
mathematical. Rather, the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions analyzed.
The
estimates contained in Citigroup’s analyses and the valuation ranges resulting
from any particular analysis are not necessarily indicative of actual values
or
predictive of future results or values, which may be significantly more or
less
favorable than those suggested by its analyses. In addition, analyses
relating to the value of businesses or securities do not necessarily purport
to
be appraisals or to reflect the prices at which businesses or securities
actually may be sold. Accordingly, the estimates used in, and the results
derived from, Citigroup’s analyses are inherently subject to substantial
uncertainty.
AmBev
announced on December 21, 2007 that it entered into stock purchase agreements
with three of the Company’s largest shareholders (other than AmBev and its
affiliates), representing as of that date approximately a 3.22% economic
interest in the Company, to purchase, subject to certain conditions, the
outstanding shares held by such shareholders in the Offer.
Citigroup’s
opinion was only one of many factors considered by the Board in its evaluation
of the Offer and should not be viewed as determinative of the views of the
Board
or the Company’s management with respect to the consideration payable in the
Offer.
The
following is a summary of the material financial analyses presented to the
Board
in connection with Citigroup’s opinion.
The financial
analyses summarized below include information presented in tabular format.
In
order to fully understand Citigroup’s financial analyses, the tables must be
read together with the text of each summary. The tables alone do not constitute
a complete description of the financial analyses. Considering the data below
without considering the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Citigroup’s financial
analyses.
Historical
Share Price Analysis
To
provide
background information and perspective with respect to the relative historical
share prices of Quinsa, Citigroup performed a historical share price analysis.
Citigroup reviewed the historical trading price for the ADRs during the 12-month
period ended December 21, 2007, which is the day that AmBev’s board of directors
announced (after the closing of the stock market) that it had approved a plan
to
make a voluntary offer for any and all Class A shares and Class B shares of
Quinsa, during which period the range of closing per ADR prices in Class B
shares equivalent was $32.00 to $40.88. Citigroup noted that the
consideration of $40.625 for each Class B share represented a premium of
approximately 21% over the closing per ADR price in Class B shares equivalent
on
December 21, 2007, which was $33.51, and a premium of approximately 27% over
the
low closing per ADR price in Class B shares equivalent during the 12-month
period.
The
following table reflects the premium that the $40.625 per Class B share
consideration represents to the closing prices and average closing prices at
various points in time prior to the public announcement of the
Offer:
|
|
Price
|
Implied
Premium
|
|
1-day
prior to announcement (12/21/2007):
|
$33.51
|
21.23%
|
|
Last
2 years average:
|
$30.32
|
33.99%
|
|
Last
1 year average:
|
$35.55
|
14.28%
|
|
Last
30 days average
|
$36.77
|
10.48%
|
|
Last
60 days average
|
$34.94
|
16.27%
|
|
Last
90 days average:
|
$34.55
|
17.58%
|
|
52-week
low (11/05/2007):
|
$32.00
|
26.95%
|
|
52-week
high (12/24/2007):
|
$40.88
|
-0.62%
|
Comparable
Companies Analysis
Citigroup
compared financial, operating, stock market information and forecasted financial
information for the Company with selected publicly traded companies that operate
in the international and Latin American brewing sector. The selected
comparable companies considered by Citigroup are as follows:
In
US$
millions, except share price
|
|
|
Closing
Price
|
|
%
of
52
|
|
Market
|
|
Enterprise
|
|
EV
/
Sales
|
|
EV
/
EBITDA
|
|
Company
|
|
1/4/2008
|
|
Week
High
|
|
Cap.
|
|
Value
|
|
2007E
|
|
2008E
|
|
2007E
|
|
2008E
|
|
Latin
America Brewers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ambev
|
|
$72.23
|
|
87.0%
|
|
$44,999
|
|
$49,236
|
|
4.6x
|
|
4.2x
|
|
9.5x
|
|
8.5x
|
|
Grupo
Modelo
|
|
4.67
|
|
81.9
|
|
15,176
|
|
17,841
|
|
2.7
|
|
2.6
|
|
8.3
|
|
7.6
|
|
Femsa
|
|
3.57
|
|
81.6
|
|
12,791
|
|
18,780
|
|
1.5
|
|
1.4
|
|
7.6
|
|
6.9
|
|
CCU
|
|
6.65
|
|
77.6
|
|
2,118
|
|
2,396
|
|
2.0
|
|
1.9
|
|
8.3
|
|
7.7
|
|
|
|
|
|
|
|
|
|
Mean
|
|
2.7x
|
|
2.5x
|
|
8.4x
|
|
7.7x
|
|
|
|
|
|
|
|
|
|
Median
|
|
2.3
|
|
2.2
|
|
8.3
|
|
7.7
|
|
International
Brewers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InBev
|
|
$86.8
|
|
85.2%
|
|
$53,285
|
|
$80,026
|
|
3.8x
|
|
3.5x
|
|
11.2x
|
|
10.3x
|
|
Anheuser
Busch
|
|
51.7
|
|
93.7
|
|
37,939
|
|
35,961
|
|
2.2
|
|
2.1
|
|
8.6
|
|
8.4
|
|
SABMiller
|
|
27.8
|
|
91.1
|
|
41,892
|
|
56,703
|
|
2.0
|
|
1.7
|
|
7.1
|
|
6.3
|
|
Heineken
|
|
56.5
|
|
91.0
|
|
27,682
|
|
30,318
|
|
1.6
|
|
1.6
|
|
7.7
|
|
7.1
|
|
Carlsberg
|
|
116.0
|
|
69.6
|
|
8,850
|
|
13,641
|
|
1.5
|
|
1.4
|
|
8.6
|
|
7.4
|
|
|
|
|
|
|
|
|
|
Mean
|
|
2.2x
|
|
2.1x
|
|
8.7x
|
|
7.9x
|
|
|
|
|
|
|
|
|
|
Median
|
|
2.0
|
|
1.7
|
|
8.6
|
|
7.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quinsa
(1)
|
|
$40.8
|
|
|
|
$4,408.4
|
|
$4,311.9
|
|
3.5x
|
|
3.0x
|
|
9.4x
|
|
8.3x
|
As
shown
in the table above, Citigroup analyzed the following information of each of
the
selected companies for comparison purposes:
|
·
|
the
closing price as of January 4, 2008 as it related to the 52-week
high;
|
|
·
|
the
market capitalization;
|
|
·
|
the
ratio of aggregate value, defined as market capitalization plus total
debt
less cash and cash equivalents, to estimated calendar year 2007 and
2008
EBITDA (as defined below) (based on publicly available estimates);
and
|
|
·
|
the
ratio of aggregate value, defined as market capitalization plus total
debt
less cash and cash equivalents, to estimated calendar year 2007 and
2008
sales.
|
Based
on
the data shown in the table above and its judgment and experience, Citigroup
applied a range of 7x to 9x Quinsa’s estimated earnings before interest, taxes,
depreciation and amortization, or EBITDA, for 2008 of approximately $522 million
(assuming proportional consolidation of QIB’s stake in each operating subsidiary
and on Quinsa’s 92.9% stake in QIB), implying firm values of $3,655 million to
$4,699 million. By adding Quinsa’s net cash of US$ 96.5 million (based on
proportional consolidation of QIB’s stake in each operating subsidiary and on
Quinsa’s 92.9% stake in QIB), Citigroup calculated an equity value range of
$3,752 million to $4,796 million. This analysis resulted in an
implied equity value per Class B share equivalent for the Company of $34.68
to
$44.33. Citigroup noted that the consideration of $40.625 per Class B share
was
within this range.
As
mentioned above, Citigroup derived firm value as a multiple of EBITDA for 2008
for the Company. Citigroup calculated firm value as (a) equity value,
based on the per share price and fully diluted shares outstanding as reflected
on each company’s latest publicly available information, assuming the exercise
of all in-the-money options, warrants and convertible securities outstanding,
less the proceeds from such exercise; plus (b) non-convertible indebtedness;
plus (c) non-convertible preferred stock; plus (d) minority interests; minus
(e)
cash and cash equivalents.
Estimated
financial data for the selected companies were based on mean estimates as of
January 4, 2008 from the Institutional Brokerage Estimate System, a data service
that compiles Wall Street research analysts’ estimates, Bloomberg, FactSet and
other publicly available information of the selected
companies. Estimated financial data for the Company were based on
estimates prepared internally by the Company’s management, referred to as the
management estimates, for 2008.
Based
on
the information for comparable companies, Citigroup calculated a range of
implied firm values of $3,655 million to $4,699 million and an implied equity
value range of $3,752 million to $4,796 million. Based upon and
subject to the foregoing, this analysis resulted in an implied equity value
per
Class B share equivalent for the Company of $34.68 to $44.33. Citigroup noted
that the consideration of $40.625 per Class B share was within this
range.
No
company
utilized in Citigroup’s comparable company analysis is identical to Quinsa. In
evaluating comparable Latin American and international brewing companies and
selecting the valuation multiples to apply, Citigroup made qualitative judgments
and assumptions with regard to industry performance, general business, economic,
regulatory, market and financial conditions and other matters, many of which
are
beyond the control of Quinsa, such as the impact of competition on the
businesses of Quinsa and the brewing industries generally, industry growth
and
the absence of any adverse material change in the financial condition and
prospects of Quinsa or the industries or in the markets in general. Mathematical
analysis (such as determining the average or median) is not in itself a
meaningful method of using comparable company data.
Precedent
Transaction Analysis
Citigroup
reviewed publicly available information for 20 completed negotiated (i.e.,
non-hostile) minority squeeze-out transactions involving publicly traded
companies announced from February 2001 through May 2007, with transaction values
above $100 million in the United States. For each selected precedent
transaction, Citigroup derived the implied premium paid per share of common
stock of the target company relative to: (a) the closing per share price of
the
target company common stock one day prior to the announcement of the transaction
and (b) the closing per share price of the target company common stock
four-weeks prior to the announcement of the transaction.
The
selected transactions reviewed by Citigroup are set forth in the following
table:
|
(Dollars
in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
Date
|
|
|
Transaction
|
Prem.
Final Offer
|
|
|
Announced
|
Acquiror
|
Target
|
%
Acquired
|
|
Value
|
1
|
Day
|
4
Week
|
|
|
May-07
|
American
Financial Group
|
Great
American Fin'l Resources
|
19.0
|
%
|
|
$
221.4
|
13.2
|
%
|
12.5
|
%
|
|
May-07
|
American
Int'l Group Inc.
|
21st
Century Insurance
|
39.5
|
|
|
724.8
|
34.6
|
|
22.6
|
|
|
Oct-06
|
VNU
|
Net
Ratings
|
39.5
|
|
|
243.0
|
9.8
|
|
11.3
|
|
|
Oct-05
|
Micro
Therapeutics Inc
|
ev3
Inc
|
29.8
|
|
|
100.8
|
8.3
|
|
7.3
|
|
|
Sep-05
|
Vector
Group
|
New
Valley Corp
|
42.3
|
|
|
106.4
|
44.7
|
|
46.7
|
|
|
Sep-05
|
IYG
Holdings & SEJ
|
7-Eleven
Inc.
|
23.0
|
|
|
1,301.5
|
32.3
|
|
14.1
|
|
|
Jul-05
|
Santos
Ltd.
|
Tipperary
Corp.
|
45.0
|
|
|
139.8
|
18.9
|
|
36.3
|
|
|
Feb-05
|
Novartis
AG
|
Eon
Labs Inc.
|
32.5
|
|
|
932.9
|
11.0
|
|
23.5
|
|
|
Jan-05
|
Danisco
A/S
|
Genencor
International
|
16.0
|
|
|
183.8
|
23.9
|
|
15.8
|
|
|
Aug-04
|
Cox
Enterprises
|
Cox
Communications
|
37.9
|
|
|
8,390.0
|
26.0
|
|
24.1
|
|
|
Jul-04
|
Investor
Group
|
AMC
Entertainment
|
50.1
|
|
|
834.0
|
13.6
|
|
28.5
|
|
|
Nov-03
|
Barnes
& Noble Inc.
|
barnesandnoble.com
Inc.
|
25.2
|
|
|
122.4
|
35.6
|
|
27.1
|
|
|
Jun-03
|
ICN
Pharmaceuticals
|
Ribapharm
|
19.9
|
|
|
187.3
|
23.0
|
|
50.2
|
|
|
Nov-02
|
Samuel
J. Heyman
|
International
Specialty Prods
|
19.1
|
|
|
138.0
|
29.6
|
|
49.0
|
|
|
Feb-02
|
Sabre
Holdings
|
Travelocity.com
|
30.0
|
|
|
447.0
|
45.8
|
|
25.2
|
|
|
Oct-01
|
TD
Bank
|
TD
Waterhouse
|
11.2
|
|
|
403.0
|
53.2
|
|
49.8
|
|
|
Oct-01
|
Investor
Group
|
NCH
Corp.
|
45.7
|
|
|
121.5
|
34.0
|
|
18.8
|
|
|
Jun-01
|
Liberty
Mutual Ins
|
Liberty
Financial
|
30.0
|
|
|
536.0
|
2.3
|
|
(1.5
|
)
|
|
May-01
|
EDS
|
Unigraphic
Solutions
|
14.0
|
|
|
170.0
|
52.9
|
|
74.1
|
|
|
Feb-01
|
Westfield
America Trust
|
Westfield
America
|
22.5
|
|
|
268.0
|
12.5
|
|
12.8
|
|
|
Mean
|
|
|
|
|
|
26.3
|
%
|
27.4
|
%
|
|
Median
|
|
|
|
|
|
24.9
|
|
23.8
|
|
|
Source:
Securities Data Corporation.
|
|
|
|
|
|
|
|
|
|
Based
on
these data and its judgment and experience, Citigroup applied a premium range
of
approximately 20% to 30% to the closing per ADR price in Class B shares
equivalent on December 21, 2007, of $33.51 and to the closing price per ADR
price for Class B shares equivalent four weeks prior to the announcement of
the
proposed transaction of $33.04, and derived an average range of approximately
$39.92 to $43.25 for the implied equity value per share of a Class B share
equivalent. The following table summarizes the precedent transaction
analysis as of December 21, 2007:
|
December
21, 2007
|
|
|
|
|
|
|
|
|
Premium
|
|
Price
per Class B
Share Equivalent
|
|
Parameter
|
Metric
|
Low
|
High
|
|
Low
|
High
|
|
|
|
|
|
|
|
|
|
1-Day
Prior
|
$33.51
|
20%
|
30%
|
|
$40.21
|
$43.56
|
|
4-Week
Prior
|
33.04
|
20%
|
30%
|
|
$39.64
|
$42.95
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
$39.92
|
$43.25
|
Citigroup
also applied a premium range of approximately 20% to 30% to the closing per
ADR
price in Class B shares equivalent on November 7, 2006, one day prior to the
announcement by AmBev that its board of directors had approved a plan to make
a
voluntary offer for any and all Class A shares and Class B shares of Quinsa,
of
$29.83 and to the closing price per ADR price for Class B shares equivalent
four
weeks prior to November 7, 2006 and derived an average range of approximately
$33.65 to $36.45 for the implied equity value per share of a Class B share
equivalent. The following table summarizes the precedent transaction
analysis as of November 8, 2006:
|
November
8, 2006
|
|
|
|
|
|
|
|
|
Premium
|
|
Price
per Class B
Share Equivalent
|
|
Parameter
|
Metric
|
Low
|
High
|
|
Low
|
High
|
|
|
|
|
|
|
|
|
|
1-Day
Prior
|
$29.01
|
20%
|
30%
|
|
$34.81
|
$37.71
|
|
4-Week
Prior
|
27.07
|
20%
|
30%
|
|
$32.48
|
$35.19
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
$33.65
|
$36.45
|
Based
on
these premiums paid analyses, Citigroup noted that the consideration of $40.625
per Class B share was within the range derived by Citigroup for the implied
equity value per Class B shares equivalent based on December 21, 2007, which
was
the last full trading day before AmBev’s announcement of the Offer.
Citigroup
further noted that the merger and acquisition transaction environment varies
over time because of macroeconomic factors such as interest rate and equity
market fluctuations and microeconomic factors such as industry results and
growth expectations. Citigroup noted that no company or transaction reviewed
was
identical to Quinsa or the Offer and that, accordingly, these analyses involve
complex considerations and qualitative judgments concerning differences in
financial and operating characteristics of Quinsa and each of the comparable
companies, as well as other factors that would affect the acquisition values
in
the comparable transactions, including the size, regulatory and economic
characteristics of the markets of each company and the competitive environment
in which it operates. Mathematical analysis (such as determining the average
or
median) is not in itself a meaningful method of using comparable transaction
data.
Discounted
Cash Flow Analysis
Citigroup
performed a discounted cash flow analysis to calculate the estimated present
value of the standalone unlevered, after-tax free cash flows that the Company
could generate based on the Company’s 2008 budget and on operating and financial
projections of the Company’s management for fiscal years 2009 through
2017.
The
Company’s operating projections were prepared for each of the countries in which
the Company operates and the projections do not include any potential synergies
arising from the Offer. Estimated terminal values for the Company
were calculated by applying to the Company’s fiscal year 2017 EBITDA, based on
management’s estimates, a range of EBITDA terminal value multiples of 7.5x to
8.5x. The unlevered, after-tax free cash flows and terminal values
were then discounted to present value using discount rates ranging from 10.5%
to
11.5%, which discount range was derived taking into account the estimated
weighted average cost of capital for the Company utilizing selected data of
the
Company and certain of the publicly held companies in the brewing sector
referred to above under “Comparable
Companies
Analysis.” Based upon the foregoing projections and assumptions, the
discounted cash flow analysis yielded the following range of implied equity
value per Class B share equivalent of the Company:
|
Implied
Price Per Class B share equivalent
|
$38.22
- $43.69
|
Citigroup
noted that the consideration of $40.625 per Class B share was within the range
of implied share prices that resulted from this analysis.
Miscellaneous
Under
the
terms of Citigroup’s engagement letter, dated December 29, 2007, the Company has
agreed to pay Citigroup a fee of $200,000 for delivering its opinion, which
fee
was payable upon delivery of Citigroup’s opinion. The Company also
has agreed to indemnify Citigroup and related persons against liabilities,
including liabilities under the federal securities laws, arising out of its
engagement.
Citigroup
has in the past provided services to AmBev unrelated to the Offer, including,
without limitation, (1) providing to AmBev a valuation report meeting the
requirements of applicable Brazilian corporation law in connection with AmBev’s
acquisition in April 2006 from Beverage Associates (BAC) Corp. of Class A shares
of the Company for which Citigroup or its affiliate received a fee of
US$100,000; (2) acting as joint bookrunner in a US$161 million international
bond issuance by an AmBev subsidiary in July 2007 for which Citigroup or its
affiliate received a fee of US$225,000; and (3) acting as joint bookrunner
in
AmBev’s US$955 million issuance of debentures in Brazil in August 2006 for which
Citigroup or its affiliate received a fee of R$487,895 (approximately
US$228,202). In addition, Citigroup and its affiliates in the past
have provided services to the Company unrelated to the Offer, for which services
Citigroup and its affiliates have received compensation, including, without
limitation, acting as financial advisor to the Company and rendering a fairness
opinion to the Company’s board of directors in connection with AmBev’s voluntary
offer in January 2007 to purchase all outstanding Class A shares, Class B shares
and ADSs not owned by AmBev and its affiliates for which Citigroup or its
affiliate received a fee of US$200,000. In addition, Citigroup’s
affiliates engaged in the commercial lending business also act as lenders to
AmBev, the Company and their respective affiliates, for which services
Citigroup’s affiliates receive compensation. In the ordinary course
of business, Citigroup and its affiliates may actively trade or hold the
securities of the Company and AmBev for their own account or for the account
of
customers and, accordingly, may at any time hold a long or short position in
those securities. In addition, Citigroup and its affiliates,
including Citigroup Inc. and its affiliates, may maintain relationships with
the
Company, AmBev and their respective affiliates.
The
Company selected Citigroup as its financial adviser in connection with the
Offer
based on Citigroup’s reputation, experience and familiarity with the Company and
its business. Citigroup is an internationally recognized investment
banking firm which regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes.
After
due
inquiry and to the best of my knowledge, I certify that the information set
forth in this statement is true, complete and correct.
|
|
|
QUILMES
INDUSTRIAL (QUINSA), SOCIÉTÉ ANONYME
|
|
Date:
|
|
|
By:
|
/s/ Miguel
Gomez Eiriz
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
Title:
|
|
|
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