Brewer AB InBev weighs IPO of stake in Asia unit

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Anheuser-Busch InBev is considering listing a minority stake in its Asia operations in an effort by the world’s biggest brewer to more quickly pay down its $100bn debt load.
The maker of Budweiser and Stella Artois beers has been in early-stage discussions with bankers in New York and Hong Kong, and could move ahead with a listing this year.
Bloomberg first reported the news on Friday that AB InBev could raise more than $5bn in proceeds from such an IPO, valuing the entire Asian business around $70bn.
But one person familiar with the discussions said a more realistic valuation would be $35bn to $45bn, and that AB InBev was still deciding what countries and assets would be included. If it were to list the new company in Hong Kong, the listing threshold of 25 per cent means that proceeds could be around $10bn.
Shares rose as much as 7 per cent on Friday before giving back gains to rise 3.8 per cent.
A spokesperson for AB InBev declined to comment on whether an Asia listing was in the works, saying only that the group was “always looking at opportunities to optimise our business and drive long-term growth.”
Analysts greeted the news positively, saying an Asian IPO would help assuage investor concerns about AB InBev’s high leverage. The brewer’s shares were the second-worst consumer staples stock in Europe last year after British American Tobacco , falling 37 per cent.
Sentiment has moved against AB InBev not only because of the debt, but also because of its high exposure to emerging markets, which have been hit by currency volatility. Consumers in mature markets like the US and the UK are also drinking less beer, favouring spirits like gin and tequila instead.
“If confirmed, the IPO of the Asia business will be a very significant event,” said Berenberg analyst Javier González Lastra. “Up until this moment, the management of AB InBev had ruled out any additional disposals to reduce leverage, so it would mark a 180-degree turn on their attitude towards deleveraging.”
The potential Asia IPO comes after AB InBev has already started to take steps to increase the pace of deleveraging. Moody’s downgraded AB InBev’s credit rating last month to just three steps away from junk, and its net debt-to-ebitda ratio of roughly 4.8 times remains stubbornly high.
In October, AB InBev cut its dividend by half to save around $4bn annually. On Thursday it sold $15.5bn in bonds , effectively buying back shorter-dated notes and issuing others to extend the maturities out by up to 40 years.
Asia is home to some of the beer industry’s fastest-growing markets in terms of volumes, with China, India and Vietnam in particular forecast to grow rapidly in the coming decade. AB InBev derives about 16.5 per cent of its sales in the region, and about 15 per cent of operating profit.
Jefferies’ Ed Mundy said an Asian IPO would unlock value and make it easier for AB InBev to make acquisitions in pursuit of growth. “A better capitalised Asian subsidiary, with the ability to raise local equity, would enable AB InBev to participate in Asia M&A,” Mundy said.

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