AB InBev may list in Hong Kong, could earn R74bn to help settle SABMiller debt

Anheuser-Busch InBev NV [JSE:ANB] is aiming to raise about $5 billion (R74 billion) in a Hong Kong listing of its Asian unit by the end of September, people familiar with the matter said, reviving a plan scrapped two months ago for what would have been the world’s biggest initial public offering of 2019.

The Belgian brewer is gauging investor demand and will launch the deal as soon as next week, said the people, who asked not to be identified as the information is private. On Thursday, the company said the resumed listing application involves its minority stake in Budweiser Brewing Company APAC Ltd., without its Australian operations, which it agreed to sell to Asahi Group Holdings Ltd. for $11.3 billion shortly after shelving the IPO in July.

The decision to proceed with the share sale would depend on “a number of factors and prevailing market conditions,” AB InBev said. A representative for the firm declined to make further comment.

The listing could be a boost to the Hong Kong bourse at a time when the market has been roiled by the U.S.-China trade war and ongoing anti-government protests that have occasionally flared into violence. At $5 billion, the AB InBev Asia’s share sale would be the world’s second largest this year, trailing Uber Technologies Inc.’s $8.1 billion U.S. IPO in May, according to data compiled by Bloomberg.

The Hong Kong dollar strengthened to the highest in a month as traders speculated that such large share sale will lock up funds and tighten liquidity in the city. The currency gained as much as 0.13% to 7.8283 versus the greenback, before trading at 7.8298 as of 12:47 p.m. local time.

The quick return to a possible IPO is the latest move in the beer giant’s whiplash plan to cut its $100 billion-plus debt pile after its mega-acquisition of SABMiller in 2016.

Even as the initial IPO, which aimed to raise $9.8 billion, failed to garner enough support from institutional funds to meet the company’s ambitious expectations, Chief Executive Officer Carlos Brito was in separate talks to offload its Australian unit to the Japanese brewer Asahi.

“The refile came earlier than we expected,” said Euan McLeish, a Hong Kong-based consumer analyst at Sanford C. Bernstein. “It’s not clear exactly why ABI is in such a rush when the Australian sale has materially reduced investor concerns over debt. Potentially they are looking to take advantage of high beer valuations in China, or perhaps they have an M&A deal waiting in the wings and they need a listing to execute it.”

The removal of AB InBev’s Australian unit, in hiving off a slow-growing part of its Asia-Pacific empire, potentially makes the latest IPO plan more attractive to investors who balked at the previous deal’s valuation. Without Australia, the Asian unit’s revenue in 2018 was $6.7 billion, representing organic growth of 7.4%, said the company in its latest preliminary prospectus.

In the earlier filing, the Asian unit including Australia had revenue of $8.5 billion, representing organic growth of 6.1%.

Why Budweiser and Bankers Failed to Sell the King of IPOs

AB InBev’s hope is that its leading position in the premium beer market in China -- with its millions of drinkers -- will still be attractive to investors, although it’s now facing rising pressure from competitors like Heineken NV, as well as shifting trends in Chinese tastes. While the Leuven, Belgium-based company commands 43% of the premium market in China, that’s down from 47% in 2014, according to data from Euromonitor International.

JPMorgan Chase & Co. and Morgan Stanley are the joint sponsors of the deal, according to the prospectus.

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