By Joanne Chiu in Hong Kong and P.R. Venkat in Singapore
The Asia-Pacific unit of Anheuser-Busch InBev SA is seeking to raise as much as $9.8 billion in what could be the biggest-ever listing of a food or drink company.
Budweiser Brewing Co. APAC Ltd. on Tuesday launched bookbuilding for an initial public offering and plans to debut on the Hong Kong stock exchange on July 19, according to a deal term sheet. The listing will help parent AB InBev, the world's largest brewer, cut debt and could allow the unit to make acquisitions in the region.
Depending on the final share price, the deal could raise between $8.3 billion and $9.8 billion. At the top of the range it would be the world's largest food and beverage IPO, beating Kraft Foods Inc.'s $8.68 billion debut in 2001, according to Dealogic. It is also set to be the biggest IPO so far this year, eclipsing Uber Technologies Inc.'s $8.1 billion deal. In May, a person familiar with the matter told The Wall Street Journal the brewer's share sale could raise about $7 billion.
The mega IPO comes despite trade tensions between the U.S. and China. On Saturday, President Trump and his Chinese counterpart Xi Jinping agreed to resume negotiations, while the U.S. will hold off on imposing additional tariffs on Chinese goods.
Budweiser APAC's portfolio spans more than 50 brands, including Budweiser, Stella Artois and Corona. Its major markets are China, Australia, South Korea, India and Vietnam. The Asian arm's net profit last year was $1.41 billion, up from $1.08 billion in 2017, with revenue rising 8.6% to $8.46 billion.
Fierce competition in China means the market's size hasn't always translated into high profits for brewers, and in recent years, Euromonitor International data shows the overall amount of beer drunk in the country has stagnated, as consumers have turned to other alcoholic drinks such as wine and baijiu, a local liquor.
However, revenues have continued to grow, and Euromonitor forecasts China will surpass the U.S. as the world's largest beer market in 2021 by sales value. In addition, foreign brewers such as Budweiser APAC have focused on China's burgeoning middle class, which is more willing to spend on high-end drinks.
Chinese brewers have outperformed the broader market in 2019. Shares in the largest, China Resources Beer Holdings Co., have risen nearly 38% in Hong Kong this year. Its stock now trades at a price of more than 39 times expected earnings for the next 12 months, compared with ratios of 18 times for AB InBev and 21 times for Heineken NV, according to Refinitiv. The equivalent price-to-earnings ratio for Hong Kong-listed shares of the nation's second-largest brewer, Tsingtao Brewery Co., is nearly 33 times. It stock has risen more than 60% in 2019.
Budweiser APAC is selling 1.6 billion new shares at 40 to 47 Hong Kong dollars ($5.12-$6.02) each, representing around 15% of its enlarged share capital and giving it a market value of up to $63.7 billion. The total funds raised could increase to as much as $11.2 billion if an option to sell 15% more stock is exercised.
JP Morgan and Morgan Stanley are the deal's joint sponsors.
Write to Joanne Chiu at email@example.com and P.R. Venkat at firstname.lastname@example.org