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AB InBev Unit Revisits Hong Kong Listing, Plans $5B IPO

Zacks Equity Research

Shares of Anheuser-Busch InBev SA/NV BUD, alias AB InBev, are witnessing revived momentum after it announced intentions to reconsider listing shares of its Asia Pacific (“APAC”) subsidiary – Budweiser Brewing Company APAC Limited — on the Hong Kong Stock Exchange. After a failed attempt to raise about $9.8 billion from the listing in July, the company is in the process of resuming applications to float a minority stake of its shares on the exchange. This time it estimates to raise about $5 billion from the listing, which has better chance of success per sources. Notably, the news led shares of the Belgium-based beer company to rally 3.4% on Sep 12.

Per sources, the company’s July listing failed on tough market conditions along with the Budweiser unit’s attempt to sell the stock at an expensive multiple of expected earnings. This led it to attract lesser-than-anticipated bids for the high-priced IPO, which would have been the world’s largest IPO of 2019, outpacing $8.1 billion raised by Uber Technologies’ UBER listing on the New York Stock Exchange. The company had then anticipated selling about 1.6 million shares of Budweiser Brewing APAC for $54-$64 billion.

However, this time, sources expect the $5-billion listing to attract bids based on the recently improved market conditions, which provide a good window to make the most of opportunities for growth. Analysts expect this listing to boost the Hong Kong exchange amid the damages done by the U.S.-China trade war as well as the ongoing anti-government protests in the city. These protests have led China's biggest e-commerce company Alibaba Group Holding Ltd BABA to delay its $15-billion listing on the exchange.

Further, AB InBev’s smaller business, after the sale of its Australia assets to Japan’s Asahi Group Holdings, Ltd. for nearly $11 billion, makes the offering attractive. The company offloaded this low-growth business soon after pulling out of the Hong Kong listing in July. Excluding Australia, the company has an attractive asset portfolio in Asia, mostly comprising businesses in the fast-growing emerging markets like China, India and Vietnam. Though Budweiser is lately losing market to rival Heineken NV HEINY, analysts remain encouraged by its growth prospects in Asia.
 
Per the company’s latest filing with the exchange, it delivered normalized EBITDA of $558 million in the first quarter, reflecting 23% growth from the year-ago period. However, including the Australia unit, normalized EBITDA was up 13.4%.

Further, sources revealed that the company plans to price the Hong Kong listing as early as Sep 23, 2019, while expecting to list shares on the exchange by Sep 30.

Through the Hong Kong listing, AB InBev is looking to take advantage of its leading position in the premium beer market in China, where it sells more than 50 beer brands. Furthermore, the move may further boost the company’s growth ambitions in the region, including potential acquisitions to expand footprint. Overall, its acquisition strategy delivered solid results over the years, making it a leading alcohol company globally.

Price Performance

Shares of AB InBev have gained 48.1% year to date, outperforming the industry’s growth of 28.1%. The robust performance of this Zacks Rank #3 (Hold) stock is attributed to its ability to retain a positive sales trend despite a though global beer market. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 


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