It was supposed to be the world’s biggest initial public offering (IPO) this year but AB Inbev canceled it on Friday on short notice just three days before the first listing on Monday.
“Anheuser-Busch InBev has decided that, at this time, it is not proceeding with the announced public offering of a minority stake in its Asia Pacific subsidiary, Budweiser Brewing Company APAC Limited, on the Hong Kong Stock Exchange (…) due to several factors, including the prevailing market conditions,” the world’s largest brewer said in a short press statement. “The company will closely monitor market conditions, as it continuously evaluates its options to enhance shareholder value, optimize the business and drive long-term growth, subject to strict financial discipline.”
As already reported before, financial analysts saw the IPO pricing which values the business at 16-18 times its enterprise value to EBITDA as an "ambitious goal" as two thirds of sales and one third of the profits come from mature markets like Australia and South Korea (inside.beer, 2.7.2019). However, the ambitious pricing was crucial for AB InBev to help paying down the massive USD 102.5 billion debt which stems mainly from the acquisition of rival SABMiller in 2016.
When asked by the Financial Times in late June, why AB InBev would want to sell the Asian business, which has been the company’s fastest-growing region, Carlos Brito, CEO of AB InBev responded: “We’re not giving away anything. If we do it, we are only going to do it if the price is right and if the market prevailing conditions are right.”
AB InBev shares fell by up to 3.6 percent on Friday in Brussels and continued their downward trend which started already on Wednesday last week.
Most of the analysts value the canceled IPO as the right move in view of the weak market environment but also see a negative impact on the further development of the world’s leading brewer. With the lack of financial resources from the IPO, the brewery giant will now need much longer to clear its debt and might miss out some strategic options for further growth. Some analysts even believe that a second dividend cut becomes unavoidable.