Budweiser brewer explores asset sales after calling off Asia IPO

  • Business Premium
  • Friday, 19 Jul 2019

The world's biggest brewer, Anheuser-Busch InBev, has added Citigroup and Bank of America Merrill Lynch to the team of banks working on the sale of its Asia-Pacific business.

ANHEUSER-Busch InBev SA is considering selling off business units in South Korea, Australia and Central America to cut its massive debt pile as it pursues a backup plan after calling off the listing of its Asian business, according to people familiar with the matter.

The Korean and Australian businesses, which make popular beers such as Cass and Victoria Bitter, were major parts of the canceled Asian initial public offering. The brewer now hopes to raise at least $10 billion from asset sales, the people said.

Private-equity firm KKR & Co. approached AB InBev in May about buying some of the Asian assets, some of the people said. KKR previously bought the Korean business and sold it back to AB InBev in 2014 for $5.8 billion. Also in May, Japanese brewer Asahi Group Holdings Ltd. expressed interest in buying the Australia business, one person said.

AB InBev, which makes one out of every four beers sold world-wide, owns hundreds of brands in dozens of countries after a global buying spree that gave it Budweiser, Stella Artois and Corona. But the deal making also saddled the company with more than $100 billion in debt at a time when global beer sales are slowing.

AB InBev last week canceled the planned IPO of its Asian business, in which it aimed to raise nearly $10 billion, citing market conditions, scrapping what would have been the largest IPO of the year. The primary aim of the listing was to reduce the company’s debt load.

Ultimately, the company hopes to get its debt down to about $80 billion, one of the people said. That would be a level at which the company could continue to pursue acquisitions and make capital investments and wouldn’t risk being downgraded below investment grade by credit-rating firms, the person said.

Another option on the table is again cutting AB InBev’s dividend, which was halved last fall, but some board members are reluctant to do this, the people familiar with the matter said. The company currently pays about $4 billion in annual dividends.

The business units under consideration for a sale—in South Korea, Australia, Guatemala and Honduras—are attractive to buyers because they have high market share and generate cash. At the same time, they aren’t high-growth markets, so selling them wouldn’t hurt AB InBev’s growth prospects, the person said.

South Korea and Australia were part of a unit, which included Japan, that generated about $3.3 billion in revenue in 2018, according to the IPO documents. The Australia business includes local rights to the Foster’s brand, which is owned outside Australia by Heineken NV and Molson Coors Brewing Co.

AB InBev considered selling one or more of these assets as an alternative to the IPO but chose to pursue the listing first, the people familiar with the matter said. The Australian, a national newspaper, earlier reported that Asahi had expressed interest in the Australian business.

The company’s U.S.-listed shares closed about 1% higher Thursday at $89.34.

The world’s largest brewer has struggled to cut into its debt as it confronts challenging emerging markets and declining beer consumption in key regions. In the U.S., its biggest market, AB InBev’s flagship Budweiser and Bud Light brands have lost share to rivals as consumers abandon American lagers for wine, spirits, craft beers and Mexican imports.

The IPO would have allowed AB InBev to reach its 2020 debt ratio target a year ahead of schedule, according to Guggenheim analyst Laurent Grandet. - WSJ

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