AB InBev. Picture: BLOOMBERG/GEERT VANDEN WIJNGAERT
AB InBev. Picture: BLOOMBERG/GEERT VANDEN WIJNGAERT

Hong Kong — The Asia-Pacific beer unit of AB InBev gained as much as 7% in its Hong Kong trading debut, a positive for the lacklustre global market in initial public offerings and vindication for the beer maker in its second attempt at an Asian listing.

Budweiser Brewing Company Apac raised $5bn selling shares at the bottom of a price range last week, in the world’s second-biggest IPO this year behind Uber Technologies. That gave the Asian unit an enterprise value of $45bn, helping the parent company reduce its enormous debt load and laying the groundwork for possible future acquisitions.

The shares rose to as high as 28.90 Hong Kong dollar in Hong Kong trading on Monday, from the offering price of 27 Hong Kong dollar. The benchmark Hang Seng index increased 0.6%.

“We’ve seen very solid demand for our stock when we did the management roadshow,” said Jan Craps, CEO of Budweiser Brewing Apac, in a briefing in Hong Kong on Monday. “We are confident there’s a strong foundation here.”

The result provides an encouraging conclusion to what’s been a rocky IPO path for the Asia arm of the world’s biggest beer company. Budweiser Brewing originally expected to storm into Hong Kong as a $64bn company, but the deal was shelved in July amid lacklustre demand.

It was a high-profile setback that spotlighted the growing disconnect between companies’ lofty private valuations and investors’ expectations, with would-be buyers sceptical of even well-known brands.

Second try

AB InBev revived the offering after selling its Australian operations to Japan’s Asahi Group Holdings for about $11bn. That about halved the size of the Asia-Pacific offering, giving investors a more focused stake in faster-growing parts of the regional business, with brands such as Cass in South Korea and Harbin in China.

“It is certainly a more reasonable level than the first time around,” Andrew Sullivan, director at Pearl Bridge Partners, said of Budweiser’s valuation. “Looking forward, it gives them an opportunity to build more deals in Asia.”

The gains in Budweiser’s trading debut may give some hope to a global IPO scene unsettled this year by volatile markets and geopolitical uncertainties. Multiple companies have halted their scheduled listings in Hong Kong, which is facing twin pressures from antigovernment protests that show no sign of abating and a trade war between the US and China.

Budweiser’s launch helps propel Hong Kong past Shanghai as the world’s number three market for IPOs this year. It may also shore up investor sentiment for upcoming IPOs that may include the lucrative secondary listing of Alibaba Group Holding.

“This IPO is quite different to many others that have faced headwinds recently,” said analyst Euan McLeish at Sanford C Bernstein. “BUD Apac is widely recognised as a high-quality company.”

He added that “strong earnings visibility” will drive continued investor interest.

The share offering helped AB InBev further trim down its $100bn-plus debt pile after its purchase of SABMiller in 2016, letting it accelerate its goal of creating a regional champion in Asia, especially through acquisitions.

CEO Craps said on Monday the company can create much value with regional players in Vietnam, Thailand and Cambodia.

The sale of the Australian unit to Asahi lopped off about one-fifth of the Asia-Pacific unit, cutting its annual sales to about $6.7bn, according to the latest preliminary prospectus. But the deal increased Budweiser Brewing’s 2018 growth rate by more than a percentage point, to 7.4%, as it removed operations in a more mature market.

Track record

The track record for IPOs hasn’t been impressive lately.

Fitness start-up Peloton Interactive dropped 11% on Thursday on its first day of trading. That same day, the Hollywood agency Endeavor Group Holdings  shelved its IPO, citing unfavourable market conditions. WeWork, the office-sharing company, was forced to put off its offering to next year in the face of tepid demand.

Uber, which raised $8.1bn for its May IPO, is down 33% from its offer price.

With Qian Ye and Kiuyan Wong.

Bloomberg