Budweiser maker Anheuser-Busch InBev is seeking to raise as much as $9.8bn from listing a minority stake in its Asia business, in what would be the world’s biggest initial public offering this year.
The share sale will help the world’s largest brewer reduce its heavy debt load and chief executive Carlos Brito has signalled that it could also pave the way for acquisitions in the region.
Budweiser Brewing Company APAC, which markets 50 brands including Budweiser and Stella Artois in China, Australia, South Korea and Vietnam, is selling 1.6bn primary shares at between HK$40-HK$47 ($5.13 to $6.02) apiece, according to a deal term sheet.
Depending on investor demand, the listing could value the company’s operations in Asia at between $54.2bn and $63.7bn. This is higher than valuations set by analysts not involved in the IPO. Jefferies and Bernstein Research have estimated the business is worth $45bn to $55bn.
Although two-thirds of Budweiser APAC’s sales and half of its profit comes from the mature markets of Australia and Korea, China is expected to be the main source of growth in the coming years. The growing middle class there gravitates towards foreign brands, which are marketed as premium products.
“ABI has built a brilliant business in China in recent years as they shifted consumption from cheaper local beers to Budweiser,” said Tristan van Strien, analyst at Redburn Securities.
One analyst who declined to be named said the implied valuation multiples were “quite punchy” at 16 to 18 times earnings before interest, tax, depreciation and amortisation. In contrast, AB InBev itself trades at about 12 times ebitda, while the largest Chinese brewer, China Resources Beer, trades at almost 22 times. Another Chinese rival, Tsingtao Brewery, trades at 15 times, according to Capital IQ data.
Even at the bottom of the range, the share placement would raise $8.3bn, surpassing Uber’s IPO on the New York Stock Exchange in May to rank as the world’s largest this year, based on data from Dealogic. It would be one of the largest floats in Hong Kong, where the biggest IPO was the $20.5bn listing of insurer AIA Group in 2010.
On Monday, Mr Brito drew a parallel between the creation of Budweiser APAC and AB InBev’s use of its Brazilian-listed entity to help convince owners of beer companies in Latin America to sell to AB InBev in recent decades.
“The number one reason to do the listing is to have a platform in the region that is seen as closer to those markets and connected to what the region will do, since that’s something that can be attractive to local groups,” he told the Financial Times.
AB InBev has been a formidable dealmaking machine in recent decades, buying up regional and national companies to create a behemoth that sells one in every four beers worldwide.
But the acquisition of SABMiller in 2016 has saddled the company with $102.5bn in debt at the end of 2018. When business slowed in emerging markets last year, credit rating agencies warned that the pace of debt reduction was too slow, prompting AB InBev to halve its dividend in October. The share sale in Asia would be used to pay down a chunk of the debt.
AB InBev has not decided how large a minority stake it will sell, the company said. The size will be disclosed later in the process.
Net income of the Asia business was $1.4bn in 2018, according to filings by the company, up from $1.1bn the year before, while revenue was $8.5bn, representing 6.1 per cent organic growth.
Shares in Budweiser APAC are expected to price on July 11 and begin trading on July 19. JPMorgan and Morgan Stanley are joint sponsors for the deal.
