AB InBev con­sid­ers par­tial list­ing of Asian op­er­a­tions

Suc­cess­ful flota­tion could raise bil­lions of dol­lars, eas­ing debt lev­els

Business Day - - INTERNATIONAL COMPANIES - Philip Blenk­in­sop and Ju­lia Fioretti Brus­sels/Hong Kong

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.

/Reuters

Beer cheer: A waiter serves a glass of beer ahead of an Anheuser-Busch InBev share­hold­ers meet­ing in Brus­sels in 2014. The world’s largest brewer is con­sid­er­ing a par­tial flota­tion in Asia that would raise bil­lions of dol­lars and help re­duce debt lev­els.

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