AB InBev considers partial listing of Asian operations
Successful flotation could raise billions of dollars, easing debt levels
Anheuser-Busch InBev (AB Inbev), the world’s largest brewer, is considering raising billions of dollars in a partial flotation of its Asian operations in a bid to help ease its debt burden, say Asian banking sources.
The Belgium-based maker of Budweiser, Corona and Stella Artois has been discussing a possible multibillion-dollar listing in Hong Kong, one banker said on Friday.
AB InBev declined to comment on the matter.
“In line with our culture, we always look at opportunities to optimise our business and drive long-term growth and we are very committed to our business in the Asia-Pacific region and excited about the potential of this geography,” an AB InBev spokesperson said.
Bloomberg reported on Friday that AB InBev was considering an initial public offering (IPO) that could raise more than $5bn, with the whole of the Asian business valued at about $70bn.
A second banker contacted by Reuters envisaged a flotation worth $2bn-$3bn.
AB InBev shares, which fell 38% in 2018, closed up 3.7% on Friday and were among the strongest risers on the FTSEurofirst 300 index of leading European stocks.
The company, which paid about $100bn for nearest rival SABMiller in 2016, announced in October it would be cutting its proposed dividend in half after beer sales fell in its largest markets of the US and Brazil.
AB InBev is targeting a return to a net debt to ebitda ratio of two times. Trevor Stirling, analyst at Bernstein Research, estimated that this multiple was 4.7 at the end of 2018 and would fall to 4.3 at the end of 2019 and 3.7 at the end of 2020.
The company on Thursday priced a $15.5bn six-part bond, the largest in the investmentgrade space since early October, and also tendered to buy back up to $16.5bn of notes maturing between 2021 and 2026. Analysts said the $70bn valuation about half the market capitalisation of the whole company appeared excessive.
At the nine-month mark in 2018, the Asia-Pacific region accounted for 20% of group volumes and 15% of AB InBev’s underlying profit.
Broker RBC Europe noted that a subsidiary partially owned by a minority was nothing new, given that it owned 62% of Brazilian brewer Ambev, but added that it was “bemused” by the valuation figures.
“This takes a bit off the gloss of the headlines and share price reaction in our view. But we regard it as a positive development insomuch as it allays some concerns about AB InBev’s indebtedness,” the broker said.
Beyond debt reduction, Chinese brewers such as Chinese Resources Beer Holdings trade at higher multiples, so a separate listing of its Asian operations could unlock value.
About a third of AB InBev’s Asia-Pacific profits come from China, with the rest coming mostly from Australia.
“It’s also an insurance policy,” said Stirling. “If you ever did run into serious problems on the Brazilian real or the Mexican peso, then all you have to do is sell off another 10%-15% and pay off a bit more debt.”
Analysts at Jefferies said accelerated debt reduction could also open the way for AB InBev to carry out further acquisitions, with privately held French group Castel among potential targets.