Khemka Family

Khemka family faced the two following options:

• To wait it out. The pros of the alternative are that the family considered potential benefits of sustaining their controlling stake before taking on a strategic partner. The main disadvantage of this option is that the company would have to run on a sparse budget and Khemka family would need to inject additional funds into the company from other parts of their business group, which in case of the company’s failure, would affect the whole family wealth. This option will require much time, which can negatively affect the company’s market share and sustainable growth due to the harsh completion from Baltica.

• To bring in a global beer company as a partner right away. The advantages of this alternative are that it would help the company to maintain and improve upon its position as the number two players on Russian beer market and to get foreign expertise, diversify product range and relate to the customers needs’ more effectively. The cons of this option are that Sun Brewing was unlikely to be bought at a sufficient premium to the currently depressed stock price and that the family will lose its’ control over the company and lose stake. We believe, that this option is better for Khemka family, because if the company fails, the family won’t lose money.

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

We decided to use relative valuation in order to calculate EV. Firstly, we calculated multiples (P/E, P/S), figures are taken from exhibit 10. Since we do not have net sales, EBITDA and net income of Sun company at TTM ( Jully 31, 2004), we took an average between the end of 2003 and 2004 estimated.

Then we calculated EV/EBITDA and EV/Sales at TTM (figures form exibit 6). From these multiples of peers we got there version of EV:

P/S 1 221,08

EV/EBITDA 1 322,75

EV/Sales 1 692,16

We also calculated EV according to its formula – M .cap – (cash+ LT liabilities+ST...