The plan to float the Fosters and other Asian beer brands owned by the world’s largest brewer, Anheuser-Busch InBev (ABInBev), has been scrapped for the time being.
ABInBev called off the near $US10 billion float on Friday after it couldn’t get much interest from investors in the region, including Australia.
The Budweiser APAC float was looking to raise between $US8.3 billion and $US9.8 billion, much of which was to go toward paying down debt at its highly leveraged parent.
AB InBev has a debt of more than $US100 billion since the purchase of rival SABMiller (which owned Fosters) in late 2016. It is struggled to reduce this impost and had been looking to the Asian float to raise some much-needed cash.
Since then global beer sales have slowed, especially bulk draught types and particularly in the US. Craft beer sales have continued to grow and ABInBev have attempted to buy its way into that sector in the US, Europe, and Australia.
The planned float of the Asian business of the global brewing major would have been the biggest initial public offering of the year.
AB InBev had been seeking to sell a minority stake in Budweiser APAC — which markets 50 brands including Budweiser and Stella Artois in China, Fosters in Australia, South Korea, and Vietnam.
It blamed “prevailing market conditions” for the decision to withdraw the sale. AB InBev would have used funds raised from the float to reduce its huge debts.
Reuters reckons the real reason for the decision to pull the float was that ABInBev was greedy and wanted to sell the shares at too higher a valuation to other Asian brewing groups.
“Budweiser APAC was marketing its shares with an indicative range of HK$40-HK$47. While it received offers within that range from hedge funds and private wealth managers, some large long-only U.S. investors, which are often prioritized in an IPO, made offers below the HK$40 per share level, the sources said,” Reuters reported.
“The indicative price range valued Budweiser at 15.5-18.2 times its enterprise value to its estimated 2020 cash flow, according to the sources. By comparison, AB InBev trades at 10.3 times its projected 12-month earnings, China-focused peer Tsingtao trades at 14.1 times, and Japan’s Kirin, another Asia-centric brewing giant, trades at 9.9 times, according to Refinitiv data.
“Unlike U.S. bourses, the Hong Kong stock exchange also restricts companies’ ability to discount their IPOs. Limiting AB InBev’s options was its decision not to take advantage of a provision that would have given it leeway to lower Budweiser’s price range by 10%, as long as it flagged that as a risk in the IPO prospectus.,” Reuters added.
