AB InBev soars on potential IPO of Asian operations
The brewer’s share price frothed up by 8% on Friday morning after Bloomberg reported it may separately list some of its operations
AB InBev’s share price jumped 8% to R1,045.79 after Bloomberg reported it is considering separately listing its Asian operations.
Its shares jumped the most since 2015 after people with knowledge of the matter said it is considering an initial public offering (IPO) of its Asian operations, as the world’s largest brewer looks at ways to unlock value after a string of acquisitions left it saddled with debt.
The Belgium-based maker of Budweiser has been talking with potential advisers about the possibility of listing its Asian business, according to the people. Any deal could raise more than $5bn, the people said, asking not to be identified as the information is private.
AB InBev may seek to value its entire Asian business at about $70bn through the share sale, the people said. It hasn’t chosen a listing venue, though Hong Kong is a possibility, they said. Deliberations are at an early stage and AB InBev could opt against pursuing a transaction, according to the sources.
The world’s largest brewer has been looking to reduce borrowings following its purchase of SABMiller for more than $100bn in 2016. AB InBev shares fell 38% last year, making it one of the worst performers on the Euro Stoxx 50 index of European blue chips.
“We are always looking at opportunities to optimise our business and drive long-term growth, of course, subject to our strict financial discipline,” a representative for AB InBev said in a statement, declining to comment on specific deals. “We are committed to our businesses in the Asia Pacific region and excited about the potential in this geography.”
Investors have been questioning AB InBev’s strategy after its third-quarter results missed expectations and the company halved its dividend. Asia Pacific contributed $2.3bn of AB InBev’s revenue in the quarter ended September 30, accounting for 17% of global sales, according to data compiled by Bloomberg.
Asia has been a key battleground for international brewers as consumption of mass-market lager slows in North America and Europe. The continent’s prospects dimmed slightly in the third quarter, with Heineken, in October, reporting its weakest Asian beer volume growth in three years.
AB InBev is the largest foreign beer maker in China, with a 16% share of the market in 2017, according to research firm Euromonitor. It has been focusing on selling higher-end brands in the country including Corona and beers made by Boxing Cat, a Shanghai-based craft brewer it acquired two years ago.
On Friday morning, AB InBev announced it raised $15.5bn in a bond auction. The annual interest demanded by investors ranged from 4.15% for AB InBev’s $2.5bn worth of six-year bonds to 5.8% for its $2bn worth of bonds that mature in 40 years.
“This is a somewhat bold move for a company that is just a month removed from a Moody’s Investors Service downgrade to the lowest investment-grade tier,” Bloomberg said on Thursday after the auction was announced.
AB InBev said part of the $15.5bn it has raised will be used to redeem some of the $16.5bn worth of bonds maturing within the next few years.
On Thursday, the brewer announced an offer to repurchase $11bn of its bonds.
In its interim results released in October, AB InBev listed debt repayment as a priority. The results statement said, “With respect to mergers and acquisitions, we will continue to consider suitable opportunities when and if they arise, subject to our strict financial discipline and deleveraging commitment,”
Bloomberg with Robert Laing