As the cofounder and CEO of Whole Foods, John Mackey had spent the better portion of his life rapidly growing the company from a niche natural grocery store in Austin, Texas, into the premier natural-foods grocer in the United States. Highly regarded as industry leader, Whole Foods contributed to the explosion in health-conscious eating sweeping the country. But not all good things lasted forever. Whole Foods had been treading increasingly choppy waters since early 2014. Increased competition in the natural-grocery space and broader macroeconomic factors wore on earnings and contributed to lackluster stock returns. Investors were becoming increasingly frustrated with company's leadership team. By the end of April 2017, Whole Foods had received a number of inquiries from both strategic and financial buyers. A full-blown sale process was launched, and though tech giant Amazon entered the bidding war late, its offer was fast and decisive, not giving Whole Foods much time to contemplate or find a competing bid. Now Mackey faces a decision that will not only shape the fate of his company, but the broader direction of the grocery industry for years or even decades to come.
As the cofounder and CEO of Whole Foods, John Mackey had spent the better portion of his life rapidly growing the company from a niche natural grocery store in Austin, Texas, into the premier natural-foods grocer in the United States. Highly regarded as industry leader, Whole Foods contributed to the explosion in health-conscious eating sweeping the country. But not all good things lasted forever. Whole Foods had been treading increasingly choppy waters since early 2014. Increased competition in the natural-grocery space and broader macroeconomic factors wore on earnings and contributed to lackluster stock returns. Investors were becoming increasingly frustrated with company's leadership team. By the end of April 2017, Whole Foods had received a number of inquiries from both strategic and financial buyers. A full-blown sale process was launched, and though tech giant Amazon entered the bidding war late, its offer was fast and decisive, not giving Whole Foods much time to contemplate or find a competing bid. Now Mackey faces a decision that will not only shape the fate of his company, but the broader direction of the grocery industry for years or even decades to come.
In 2018, AB InBev faced a difficult decision: whether to keep its $8 billion dividend program or cut dividends either partially or in full. This case facilitates a theoretical discussion and practical application of dividend policies and their role in value creation for firm stakeholders. Students gain experience formulating a dividend policy and understanding its effects on debt, cost of capital, and company valuation. A widely recognized global leader of the beer industry, AB InBev had built a global presence and a broad brand portfolio through carefully selected mergers and acquisitions of brewers, from small local craft breweries to large multinationals. 2016 marked the epitome of AB InBev's success-the company had successfully completed the acquisition of SABMiller. This $104 billion merger was enabled by the largest corporate bond offering to date-$61.9 billion. But in October 2018, the financing side of this landmark deal had become the pain point for the company's management. Unexpectedly deteriorating economic conditions in Latin America, fluctuations in commodity prices, and changing consumer tastes slowed the growth in the company's EBITDA, undermining its ability to delever. The company's persistently high debt levels became the talk of the town, and the corporate treasury team was certain that leverage would have to be brought down to move AB InBev's price in a positive direction. But what sounded very simple was not an easy feat. Cutting dividends was one of the avenues AB InBev could pursue, but was it the best one? This case has been successfully taught at the University of Virginia Darden School of Business in the Financial Policy module of ""Financial Management and Policies,"" a course in the first-year MBA core curriculum.