AB InBev’s shelved Asian listing cuts Hong Kong IPO volume in half

Move leaves brewer without IPO proceeds it needs to help pay down debt and fund acquisitions

By BLOOMBERG

HONG KONG • Anheuser-Busch InBev NV’s (AB InBev) 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’ve had this year if the US$9.8 billion (RM40.31 billion) listing had gone ahead.

The world’s biggest brewer said in a statement last Friday that it had decided not to proceed with an IPO of its Asia-Pacific unit, Budweiser Brewing Co APAC Ltd. The company had been struggling to price its shares, people familiar with the matter 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$9.44 billion raised from 79 other Hong Kong listings this year, according to data compiled by Bloomberg. That dampens momentum generated last year when 202 companies 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 Inc’s US$8.1 billion US listing in May, which remains the biggest globally 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 show.

The US surge was driven largely by so-called tech unicorns, start-ups valued at US$1 billion or more, many of them going public after years of investor anticipation. Those companies included Uber’s smaller ride-hailing rival Lyft Inc, with its US$2.34 billion listing in March, and image-sharing website Pinterest Inc.

Listing Competition
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 in 2018 and 2017. In that environment, exchanges are increasingly competing for listings.

Hong Kong Exchanges & Clearing Ltd, 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 Ltd 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 the arrest last month of the former joint head of its IPO vetting team and two others on charges of corruption and mismanagement in relation to two listing applications, which weren’t disclosed.

Alibaba Boost
Still, other mega IPOs are waiting in the wings that may give the exchange an enormous boost. Alibaba Group Hol-ding Ltd is preparing to raise as much as US$20 billion in a second offering in Hong Kong, people familiar with the matter have said. That share sale would be the exchange’s largest since 2010.

AB InBev’s Asia unit was offering 1.63 billion shares in its IPO at HK$40 (RM21.03) 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 NV and Carlsberg A/S.

Too Lofty
Hoai Ngo, a senior credit analyst at Bloomberg Intelligence, said expectations had been “a little too lofty” for the listing.

“The valuations they gave in the range were too high to begin with,” Ngo said. “When they were pricing the IPO with a mid-20s 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 Pablo Jimenez, a spokesman for the company. — Bloomberg