AB InBev's Asia unit pips Uber with US$9.8b HK IPO

Hong Kong

ANHEUSER-BUSCH (AB) InBev has kicked off the year's biggest initial public offering (IPO), a sale of shares in its Asia-Pacific beer unit that could raise as much as US$9.8 billion and top Uber Technologies Inc's May listing.

The Hong Kong IPO consists of 1.63 billion shares of Budweiser Brewing Company APAC Ltd, offered at HK$40 to HK$47 (S$6.95 to S$8.17) each, going by the terms of the deal obtained by Bloomberg on Tuesday. Trading is expected to start on July 19.

The price range represents a market value of as much as US$64 billion for Budweiser Brewing, on par with that of Heineken, the world's second-largest brewer. The listing will enable acquisitions by creating a "local champion" and will help AB InBev reduce its debt, chief financial officer Felipe Dutra has said.

AB InBev shares rose 1.6 per cent on Tuesday morning in Brussels. It has gained 38 percent this year.

The brewer is counting on the region's growth potential to draw interest in the shares as the beer business faces stagnating prospects elsewhere.

The company has already cornered the premium market in China and has been buying up local craft brands to reach fashionable millennials with a taste for more expensive brews.

The range values Budweiser Brewing at 28.5 to 33.5 times consensus 2020 earnings, according to terms for the deal obtained by Bloomberg. Heineken trades as 20.2 times that year's estimated profit; China Resources Beer Holdings Co is valued at 37.2 times, data compiled by Bloomberg show.

The Belgian brewer is among multinational companies that are reviewing their business strategies in Asia amid fierce competition from local rivals. French hypermarket operator Carrefour has agreed to sell a controlling stake to China's Suning.com Co, while German food retailer Metro AG has put its Chinese operations up for bidding.

The IPO could give AB InBev more flexibility to seek local partners, a strategy the brewer has deployed in Latin America with its Ambev SA unit. Heineken has formed a partnership with China Resources, challenging AB InBev's position as the largest foreign brewer in the world's biggest market.

The Asia-Pacific unit had net income of US$1.4 billion last year, up from US$1.1 billion a year earlier, says a preliminary prospectus.

The market value is within previous expectations for US$40 billion to US$70 billion. At US$9.8 billion, Budweiser Brewing's sale would rank as the biggest IPO this year, surpassing Uber's US$8.1 billion offering in May, going by data compiled by Bloomberg.

AB InBev is still trying to reduce the debt it amassed through its purchase of SABMiller for more than US$100 billion. S&P Global Ratings said in March it may cut its credit rating after Moody's Investors Service downgraded AB InBev one level late last year.

AB InBev is scheduled to price the offering on July 11. JPMorgan Chase & Co and Morgan Stanley are joint sponsors for the Hong Kong share sale. BLOOMBERG