Hong Kong: AB InBev to raise up to USD 9.8 billion within 2 weeks

By selling its Asia-Pacific business AB InBev hopes to raise up to USD 9.8 billion in the next two weeks. The deal will be the world’s biggest initial public offering (IPO) this year. The Belgium based brewer announced in a term sheet to sell 1.6 billion primary shares at between HKD 40-47 (USD5.13-6.02) apiece which could value the company’s Asian operations at between USD54.2bn and USD63.7bn. The deal is expected to price in New York on July 11 and the first listing will be in Hong Kong on July 19.

Financial analysts see 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. However, growing business in a huge market like China with a population that is increasingly upgrading from lower priced national beers to higher priced international beer brands like Budweiser is likely to upset for this.

“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,” Carlos Brito, CEO of AB InBev told the Financial Times. As strong as this argument may be, the most important reason seems to be the reduction of debt. The IPO is intended to help paying down AB InBev’s massive USD 102.5 billion debt which stems mainly from the acquisition of rival SABMiller in 2016.

In October last year, shares of AB InBev experienced the sharpest decline in the last decade when the company had to announce weaker than expected third-quarter profits and to cut the dividends of the listed company in half. According to the company’s projections, the achieved synergies following the SABMiller acquisition in 2016 and the executed cost cuts were not sufficient to secure the repayment of debt stemming from the acquisition (inside.beer, 25.10.2018).

Speculations about a sale of AB InBev’s Asian business came up in January (inside.beer, 14.1.2019) and had been confirmed in May when AB InBev presented the quarterly figures (inside.beer, 7.5.2019).

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