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AB InBev considers partial IPO of Asian business: bankers

Reuters  |  BRUSSELS/HONG KONG 

By Philip and Julia Fioretti

BRUSSELS/HONG KONG (Reuters) - Anheuser-Busch InBev, the world's largest brewer, is considering raising billions of dollars in a partial flotation of its Asian operations, two Asian sources said, in a deal that would help to ease its debt burden.

The Belgium-based maker of Budweiser, Corona and has been discussing a possible multibillion-dollar listing in Hong Kong, one said on Friday.

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 region and excited about the potential of this geography," an said.

reported on Friday that was considering an initial public offering (IPO) that could raise more than $5 billion, with the whole of the Asian business valued at about $70 billion.

A second contacted by envisaged a flotation worth $2-3 billion.

AB InBev shares, which fell by 38 percent last year, closed up 3.7 percent on Friday and were among the strongest risers on the FTSEurofirst 300 index of leading European stocks.

The company, which paid about $100 billion for nearest rival in 2016, announced in October that it would be cutting its proposed dividend in half after beer sales fell in its largest markets of the and

AB InBev is targeting a return to a net debt to EBITDA ratio of two times. Trevor Stirling, 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 $15.5 billion six-part bond, the largest in the investment grade space since early October, and also tendered to buy back up to $16.5 billion of notes maturing between 2021 and 2026.

INSURANCE POLICY

Analysts said the $70 billion valuation - about half the market capitalisation of the whole company - appeared excessive.

At the nine-month mark in 2018 the region accounted for 20 percent of group volumes and 15 percent of AB InBev's underlying profit.

noted that a subsidiary partially owned by a minority was nothing new, given that it owned 62 percent 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 nonetheless we regard it as a positive development insomuch as it allays some concerns about AB InBev's indebtedness," the said.

Beyond debt reduction, Chinese brewers, such as Chinese Resources Beer Holdings Co, trade at higher multiples than AB InBev, so a separate listing of its Asian operations could unlock value.

About a third of AB InBev's profits come from China, with the rest mostly from

"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 percent and pay off a bit more debt."

Analysts at Jefferies said that 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.

(Reporting by Philip in Brussels and Julia in Hong Kong, additional reporting by in London; Editing by Alastair Macdonald, and David Goodman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Sat, January 12 2019. 16:09 IST
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