THE Asia-Pacific unit of Anheuser-Busch InBev SA aims to raise as much as $9.8 billion in what could be the largest initial public offering so far this year and the biggest-ever listing of a food or drink company.
Budweiser Brewing Co. APAC Ltd. on Tuesday started taking orders from investors for the IPO set to debut on the Hong Kong stock exchange on July 19 and value the business at up to $63.7 billion, according to a deal document reviewed by The Wall Street Journal.
The listing will help parent AB InBev, the world’s largest brewer, reduce its huge debt pile and the unit—whose major markets are China, Australia, South Korea, India and Vietnam—make acquisitions in the region.
The robust pricing for the stock offering shows how investors are betting AB InBev’s big beer brands can keep growing in Asia, even as Budweiser and Bud Light volumes slow in North America. Many younger drinkers have switched from beer to spirits, or are eschewing alcohol altogether.
AB InBev’s Asia business, which includes such brands as Budweiser, Stella Artois and Corona, made up about 18% of the company’s total volume for the first quarter. The unit’s revenue rose 8.6% to $8.46 billion last year.
Budweiser is the third-largest beer brand in China by retail sales, according to Euromonitor. AB InBev also owns Chinese brand Harbin, which ranks fifth in retail sales.
Some of the trends playing out in the West are apparent in China as well. Per capita consumption of beer in the country has declined in recent years as consumers turn to wine and baijiu, a local spirit. Craft beer, which tends to be stronger and more flavorful than mainstream lagers, has also won favor.
The shift from mass-market brands reduces beer volumes overall since people drink smaller quantities. However, craft beers are pricier, and so brewers’ revenue in China has continued to grow. Euromonitor forecasts China will surpass the U.S. as the world’s largest beer market by sales in 2021.
Those dynamics have helped Chinese brewers outperform the broader stock market in 2019 and trade at higher valuations than their rivals in the West command.
Over the past decade, AB InBev has built its China operation from a fringe business into one of its top five markets, Chief Executive Carlos Brito said in an interview earlier this year. After establishing Budweiser as a leading premium brand in China, the brewer decided several years ago to introduce even pricier, higher-margin brands such as Stella Artois and Corona—which sell for twice the price of a Budweiser—through an alternate distribution system that delivers to restaurants and bars frequented by better-off customers.
The listing comes at a time when rival Heineken NV is pushing deeper into China. Heineken, the world’s second-biggest brewer, last year struck a multibillion-dollar deal with government-controlled China Resources Beer Holdings Co. that secured it a sprawling distribution network.
Having a separately listed division would give AB InBev a platform to make acquisitions in the region. Analysts have suggested the newly listed shares could be used to gain control of ThaiBev ’s business in Vietnam or San Miguel’s business in the Philippines. AB InBev has deployed a similar strategy in Latin America through separately listed AmBev.
The other main rationale for the listing, which has been under consideration for much of the year, is to reduce debt, an effort that has included a dividend cut. AB InBev’s debt stood at over $100 billion at the end of last year after a string of acquisitions including its purchase of SABMiller, the world’s No. 2 brewer.
Depending on its final offer price, the stock offering could raise between $8.3 billion and $9.8 billion. At the top of that range, it would be the world’s largest food-and-beverage IPO, topping Kraft Foods Inc.’s $8.68 billion debut in 2001, according to Dealogic. It is also set to eclipse Uber Technologies Inc.’s $8.1 billion IPO as the largest of the year.
The listing by AB InBev comes despite trade tensions between the U.S. and China. On Saturday, President Trump and his Chinese counterpart, Xi Jinping, agreed to resume negotiations, while the U.S. holds off on imposing additional tariffs on Chinese goods.
Budweiser APAC plans to sell 1.6 billion new shares at 40 to 47 Hong Kong dollars ($5.12 to $6.02) each, representing about 15% of its enlarged share capital. Total funds raised could increase to as much as $11.2 billion if an option to sell 15% more stock is exercised—which would be a boon to AB InBev’s debt-reduction efforts. - WSJ
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