AB InBev cancels Hong Kong IPO

AB InBev cancels Hong Kong IPO

AB InBev cancels Hong Kong IPO

The demise of AB InBev NV's blockbuster initial public offering in Hong Kong left the world's largest brewer in a bind.

Analysts at Bernstein last week described the company as a "high-quality asset", but estimated the shares only offered 6% upside to IPO investors, even at the low end of its price range.

Budweiser APAC was seeking to raise between $8.3 billion and $9.8 billion through the float, much of which was to go toward paying down debt at its highly leveraged parent.

The cancelled IPO is also a setback to the Hong Kong stock exchange, which hoped Budweiser's listing would help attract other high-profile global companies at a time of increased trade tensions between the United States and China.

The world's biggest brewer said in a statement last Friday that it had decided not to proceed with an IPO of its Asia-Pacific unit, Budweiser Brewing Co APAC Ltd. The company may explore options such as selling a minority stake in the Asian business, though there is no immediate plan for a deal, people familiar with the matter said.

Bold Move From the beginning, investment banks appeared to be overly emboldened by the promise of Asia's beer boom.

It's possible that AB InBev wasn't prepared to get out of bed for less than $10 billion.

It also cuts into the Hong Kong exchange's tally.

In the run-up to the pricing of the IPO last week, it became clear that demand from institutional funds didn't meet the company's expectations, the people said.

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"This is likely a case of valuation push-back, not market conditions", said Kathleen Smith, founding principal at Renaissance Capital, a USA -based research firm and manager of IPO-focused exchange-traded funds, who noted that returns from IPOs had generally been strong this year. Hours before the announcement Friday afternoon in the USA, advisers had considered cutting the IPO's size and relaunching the offer in a bid to rescue the deal.

In addition to reducing debt, AB InBev - the maker of Stella Artois, Corona and Modelo - had seen splitting off one of its growth motors as a way to woo local partners.

For Morgan Stanley, that's particularly important.

AB InBev said that the deal would allow it to expand in Asia.

AB InBev now has a standing debt of over $100 billion, a tab it has been growing since it purchased its rival SABMiller in 2016. Now Brito has to find other ways to manage that debt load.

Sources involved in the deal said investors were unwilling to accept AB InBev's valuations for Budweiser APAC. At the same time, rival Carlsberg A/S increased its share from 9 per cent to 14 per cent.

The company said it would closely monitor conditions in Asia for its next move.

The brewer also markets Tuborg and super premium brands Grimbergen and 1664 Blanc in China. The hit to its wallet and credibility is that bit more noticeable. It trails only China Resources Beer Holdings, maker of Snow beer, the country's top-selling brew by volume. That deal gave the Dutch company access to an enormous distribution network in urban and rural segments of the country, and it reported shipments grew more than 10 per cent in China in the first quarter of the year.

AB InBev had expected Budweiser's IPO to eclipse Uber Technologies as the biggest IPO of the year.

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