By Joanne Chiu, Jennifer Maloney and Corrie Driebusch
Anheuser-Busch InBev SA called off the nearly $10 billion
listing of its Asian business, citing market conditions, scrapping
what would have been the largest initial public offering of the
year and dealing a setback to the brewer's efforts to pay down
debt.
The Hong Kong IPO of the unit, which sells beers such as
Budweiser, Stella Artois, Corona and Hoegaarden, had originally
aimed to raise between $8.3 billion and $9.8 billion. On Thursday,
the unit had guided investors to expect it would price in the lower
half of a previously indicated range, people familiar with the
matter said.
The withdrawal highlights a contradiction in the global IPO
market: While the U.S. is red-hot, the same isn't true for Asia or
Europe, where activity is down sharply as a result of concerns
about economic growth and trade tensions with the U.S.
AB InBev Friday said it would "closely monitor market
conditions" while it evaluates its options.
Shares of AB InBev fell sharply on the news and were trading
late Friday in the U.S. at $87.05, down 2.7% after earlier dropping
nearly 5%.
This is the third-largest withdrawn IPO on record, according to
Dealogic. It ranks behind the attempted $10.1 billion listing of
Spanish lottery giant Sociedad Estatal de Loterias y Apuestas del
Estado SA in 2011 and insurer AIA Group's first effort to go public
in Hong Kong, in 2009, when it sought to raise $10 billion.
The company could try to list again in Hong Kong, or on another
exchange, though it would need to resubmit new listing documents
with more up-to-date financial data.
AB InBev, which makes one out of every four beers sold
world-wide, had said the listing would allow it to pursue deals in
Asia and reduce its debt load, which stood at more than $100
billion at the end of last year after a string of acquisitions.
Chief Executive Carlos Brito said in May that the company could
meet its debt-reduction goals with or without the Asia IPO.
For now, however, shelving the fundraising could make it harder
for the unit to pursue regional deals, and for the parent to cut
its huge debt pile, which stood at more than $100 billion at the
end of last year after a string of acquisitions.
Some investors and analysts said demand had been capped by the
relatively high valuations that AB InBev was seeking. Also, once
the brewer disclosed a price range, it couldn't go outside that,
according to Hong Kong market rules.
Alex Wong, a director at hedge fund Ample Capital, said his firm
had subscribed for the IPO, but that AB InBev might have
overestimated investor appetite amid global economic
uncertainty.
"It's richly valued but given debt reduction is the key goal for
AB InBev to do the spinoff, it certainly would not want to sell the
unit's stock at a cheap valuation," he said.
Some bankers and investors said an absence of cornerstone
investors made it more challenging to build a book of orders and to
establish a viable offering price. Major Hong Kong IPOs are
typically supported by cornerstone investors, who are big names
such as sovereign-wealth funds, large institutional investors,
tycoons, or state-owned enterprises.
They endorse a deal by committing to buy a fixed dollar amount
of stock in an IPO, no matter where in the range it prices, and
agreeing to hold on to the shares, usually for at least six
months.
Budweiser Brewing Co. APAC Ltd. originally planned to sell
nearly 1.63 billion new shares at an indicative range of 40 to 47
Hong Kong dollars ($5.11 to $6.01), valuing the unit at up to $63.7
billion. Even at or near the bottom of the range, this would have
been the world's largest stock market debut this year by amount of
money raised, eclipsing Uber Technologies Inc.'s $8.1 billion share
sale. Trading was slated to begin on July 19.
Euan McLeish, senior analyst for Asia-Pacific beverages at
Sanford C. Bernstein, said a fair value for the stock was HK$42.50
a share, given its quality assets and diversified regional
footprint. However, that price represents an enterprise value of
19.3 times earnings before interest, taxes, depreciation and
amortization in the next 12 months -- an expensive-looking 65%
premium to the average for global brewers.
The development could be a bad omen for large share sales to
come in Hong Kong, such as Alibaba Group Holding Ltd.'s potential
listing in the city later this year.
This year has already been a disappointing one for new issues in
Asia and Europe. Excluding Japan, $28.1 billion has been raised in
Asian IPOs so far in 2019, down 33% compared with the same period
last year, according to Dealogic. European activity is down 59%.
Earlier this past week, insurer Swiss Re AG suspended the London
listing of a U.K. business due to weak investor demand.
By contrast, money raised in U.S. IPOs so far this year is up
37%, according to Dealogic, as public investors clamor for shares
of fast-growing technology startups like Pinterest Inc. and Slack
Technologies Inc.
While the AB InBev IPO could have been accomplished by setting a
lower price range or by selling fewer shares, the company resisted,
according to a person familiar with the offering. To find ample
buyers for such a big deal can be challenging, the person said, and
AB InBev lacked the big growth numbers offered by tech companies
such as Alibaba, which raised $25 billion in its 2014 IPO.
JPMorgan Chase & Co. and Morgan Stanley were the AB InBev
deal's sponsors, the most senior role for banks on a Hong Kong IPO.
They were also global coordinators and bookrunners with Bank of
America Merrill Lynch and Deutsche Bank AG.
AB InBev has struggled to cut into its debt as it grapples with
challenging emerging markets and declining beer consumption in key
regions. The brewer last year halved its dividend, sending its
stock price tumbling.
Those troubles have weighed on the company's results but in May
it reported better-than-expected earnings as it works to diversify
away from mass-market American lager.
Write to Joanne Chiu at joanne.chiu@wsj.com, Jennifer Maloney at
jennifer.maloney@wsj.com and Corrie Driebusch at
corrie.driebusch@wsj.com
(END) Dow Jones Newswires
July 12, 2019 16:44 ET (20:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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