AB InBev's IPO suspension a blow to HK bourse

Budweiser Asia's $13.3b listing, slated to be year's largest, would have doubled stock exchange's IPO volume for 2019

Mr Jan Craps, chief executive of Budweiser Brewing APAC, in Hong Kong at the start of this month. Anheuser-Busch InBev said the Asia unit will not be going public as planned due to "prevailing market conditions".
Mr Jan Craps, chief executive of Budweiser Brewing APAC, in Hong Kong at the start of this month. Anheuser-Busch InBev said the Asia unit will not be going public as planned due to "prevailing market conditions". PHOTO: BLOOMBERG

HONG KONG • Anheuser-Busch InBev's decision to suspend what was slated to be the year's largest initial public offering (IPO) leaves Hong Kong's stock exchange with half the IPO volume that it would have had this year if the US$9.8 billion (S$13.3 billion) listing had gone ahead.

The world's biggest brewer said on Friday last week that it had decided not to proceed with the IPO of its Asia-Pacific unit, Budweiser Brewing Company APAC. The Asia unit had been struggling to price its shares, sources had said earlier.

The move leaves the brewer without the IPO proceeds it had sought to help pay down debt and fund acquisitions.

It also cuts into the Hong Kong exchange's tally. The IPO could have doubled the US$9.4 billion raised from 79 other Hong Kong listings this year, according to data compiled by Bloomberg.

That dampens the momentum generated last year, when 202 firms raised US$36.8 billion - the most since 2010.

Even at the bottom of its targeted range, the Budweiser Brewing APAC share sale would have topped Uber Technologies' US$8.1 billion United States listing in May, which is still the world's biggest this year.

IPOs in the US remain on track for the best year since 2014, with more than US$32 billion raised in 95 listings, the data shows.

The US surge was driven largely by so-called technology unicorns - start-ups valued at US$1 billion or more - as many of these went public after years of investor anticipation.

  • 654

    Number of listings globally this year, through which firms raised about US$83 billion - less than half the annual totals last year and in 2017. In this climate, exchanges are increasingly competing for listings.

These companies included Uber's smaller ride-hailing rival Lyft, with its US$2.34 billion listing in March, and the image-sharing website Pinterest.

Globally, though, the IPO pace has slowed. Companies have raised about US$83 billion in 654 listings this year - less than half the annual totals last year and in 2017. In this environment, exchanges are increasingly competing for listings.

Hong Kong Exchanges & Clearing, which owns and operates the city's exchange, has been engaged in an increasingly crowded battle for listings, as exchanges from Shanghai to Singapore ease rules to attract fast-growing companies.

US exchanges are also continuing to attract Chinese companies despite trade conflicts.

Video game live-streaming platform DouYu International Holdings is set to price its shares tomorrow, raising as much as US$944 million in what will be the largest US IPO by a China-based firm this year.

The Hong Kong exchange's reputation also took a hit with last month's arrest of the former joint head of its IPO vetting team, as well as two others on charges of corruption and mismanagement in relation to two listing applications, which were not disclosed.

Still, other mega IPOs are waiting in the wings that may give the exchange an enormous boost.

Alibaba Group Holding is preparing to raise as much as US$20 billion in a second offering in Hong Kong, sources said. That share sale will be the exchange's largest since 2010.

AB InBev's Asia unit was offering 1.63 billion shares in its IPO at HK$40 to HK$47 each.

That range valued the unit at 28.5 to 33.5 times consensus 2020 earnings, higher than valuations for competitors Heineken and Carlsberg.

"The valuations they gave in the range were too high to begin with," said Bloomberg Intelligence senior credit analyst Hoai Ngo.

"When they were pricing the IPO with a mid-twenties multiple, it was probably a little bit too high."

AB InBev cited "prevailing market conditions" in putting the unit's IPO on ice.

"We will closely monitor market conditions as we continuously evaluate our options to enhance shareholder value, optimise our business and drive long-term growth, subject to strict financial discipline," said company spokesman Pablo Jimenez.

The beer business has been booming in parts of Asia.

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.

A separate Asian unit would have made it easier to form tie-ups involving shareholdings and stake swaps.

Budweiser Brewing APAC is the biggest foreign brewer in China. It trails only China Resources Beer Holdings, maker of Snow beer, the country's top-selling brew by volume.

BLOOMBERG

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A version of this article appeared in the print edition of The Straits Times on July 15, 2019, with the headline AB InBev's IPO suspension a blow to HK bourse. Subscribe