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MarketScreener Homepage  >  Equities  >  Euronext Bruxelles  >  Anheuser-Busch InBev    ABI   BE0974293251

ANHEUSER-BUSCH INBEV

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Anheuser Busch InBev : AB InBev Tries Plan B to Battle Slow Beer Sales, Heavy Debt

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07/20/2019 | 02:48am EDT

By Saabira Chaudhuri

Anheuser-Busch InBev SA agreed to sell its Australian unit to Asahi Group Holdings Ltd., as the world's biggest brewer tries to pare its heavy debt at a time when American beer drinkers have been losing their taste for the stuff.

AB InBev, which makes one out of every four beers sold world-wide, owns hundreds of brands in dozens of countries after a global buying spree that gave it Budweiser, Stella Artois and Corona. But those deals saddled the Belgian brewer with about $100 billion in debt; meanwhile, beer sales have slowed in the U.S. and other major markets.

The deal announced Friday for the Australian unit, for $11.3 billion was a Plan B money raiser for the AB InBev after it yanked its plan for an Asia IPO last week, according to people familiar with its thinking. The company had hoped the stock offering would raise nearly $10 billion, enabling a substantial reduction of debt. The company cited market conditions for scrapping the listing, while analysts and investors said the offering was priced too high.

AB InBev shares jumped as investors welcomed the price struck for the unit, Carlton and United Breweries, plus an indication from the company that it was still considering an initial public offering of its Asia businesses.

The brewer has struggled particularly in the U.S., where its flagship Budweiser and Bud Light brands have bled share to rivals. In response, it has snapped up craft brewers, launched limited-editions of Bud and new flavors for Bud Light, and put more marketing muscle behind its low-carb brew Michelob Ultra.

So far those moves haven't plugged the leak, with Bud shipments in the U.S. continuing on a three-decade decline, according to Beer Marketer's Insights. For the first quarter, AB InBev reported a 1.2% drop in North American volumes.

AB InBev isn't alone among brewers in suffering from changing consumer tastes in the U.S., the world's largest beer market by value. Big brands from Molson Coors Brewing Co. and Heineken NV have lost share as beer drinkers choose craft varieties over mainstream lagers or shun beer in favor of spirits and wine. But AB InBev derives more of its profit from the U.S. than Heineken and Carlsberg A/S, the second and third largest international beer companies.

Beyond the U.S., AB InBev has grappled with economic disruption in Brazil, South Africa and Argentina that has capped consumer spending. Weaker currencies have reduced the value of sales in some emerging markets when converted into dollars. Investors have also questioned the company's business model, saying it is too focused on cost-cutting and dependent on acquisitions for growth.

Against that backdrop, AB InBev has been trying to tackle its debt, including by slashing its dividend last year and exploring the Asia IPO.

On Friday, the company reiterated its commitment to spinning off its Asia arm now without Carlton and United Breweries, saying it "continues to believe in the strategic rationale" of listing a minority stake in the division "at the right valuation."

Australia accounts for an estimated 27% of AB InBev's profit in Asia, according to brokerage Sanford C. Bernstein.

Analysts said the exclusion of Australia, a mature beer market, could help AB InBev woo investors to a new Asia offering that promises higher growth, helped by countries like China, the world's biggest beer market by volume.

The company said it would use almost all proceeds from the Australia sale to pay down debt. Analysts said that could allow AB InBev to hit its debt-reduction target a year ahead of schedule and help preserve its credit rating, putting it in a better position to make acquisitions.

AB InBev ultimately hopes to shrink it debt to about $80 billion, according to a person familiar with its thinking.

Jefferies analyst Edward Mundy suggested AB InBev could look to buy businesses like Thai Beverage Public Co., Castel Group, a leading brewer in Africa, and San Miguel, which is partly owned by Kirin Holdings Co.

The Wall Street Journal reported Thursday that AB InBev, following the IPO's cancellation, was considering selling other assets, including its businesses in Australia, South Korea, Guatemala and Honduras. The Journal reported that Japan's Asahi in May expressed interest in buying the Australia business, and that AB InBev was approached the same month by private-equity firm KKR & Co. about buying some Asian assets.

For Asahi, the deal represents its latest move to expand overseas. In 2016, the company bought European premium brands Peroni and Grolsch from AB InBev for about $2.9 billion. Japan's beer market has been in decline since the early 2000s, according to Jefferies, and Japanese brewers have shown a willingness to pay high prices to secure a foothold in international markets.

The deal announced Friday will help Asahi build on its diverse footprint in Australia, which includes local rights to the Schweppes soft-drinks brand and Independent Liquor, which makes ready-to-drink alcoholic beverages. Asahi also sells Asahi Super Dry and local craft brands like Cricketers Arms.

The Japanese company will gain the rights to market AB InBev's global brands in Australia, as well as ownership of local beer brands including Victoria Bitter and Pirate Life. Asahi also gets local rights to the Foster's brand, which is owned outside Australia by Heineken and Molson Coors.

The deal is expected to close by the first quarter of next year.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
ANHEUSER-BUSCH INBEV 1.10% 86.57 Delayed Quote.50.03%
ASAHI GROUP HOLDINGS LTD -0.37% 4796 End-of-day quote.14.22%
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Financials (USD)
Sales 2019 55 400 M
EBIT 2019 18 473 M
Net income 2019 10 925 M
Debt 2019 96 852 M
Yield 2019 2,08%
P/E ratio 2019 18,1x
P/E ratio 2020 19,4x
EV / Sales2019 5,14x
EV / Sales2020 4,80x
Capitalization 188 B
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Technical analysis trends ANHEUSER-BUSCH INBEV
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TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 34
Average target price 105,59  $
Last Close Price 95,94  $
Spread / Highest target 26,8%
Spread / Average Target 10,1%
Spread / Lowest Target -35,6%
EPS Revisions
Managers
NameTitle
Carlos Alves de Brito Chief Executive Officer
Olivier Goudet Chairman
Luis Felipe Pedreira Dutra Leite Chief Financial & Solutions Officer
Martin J. Barrington Non-Executive Director
William F. Gifford Non-Executive Director
Sector and Competitors
1st jan.Capitalization (M$)
ANHEUSER-BUSCH INBEV50.03%186 176
AMBEV SA22.89%74 434
HEINEKEN22.02%59 599
CARLSBERG A/S44.67%22 136
ASAHI GROUP HOLDINGS LTD14.22%20 741
KIRIN HOLDINGS CO LTD-6.94%17 522