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Anheuser-Busch InBev Soars on Possible IPO of Asian Business

Anheuser-Busch InBev NV shares jumped the most since 2015 after sources said it was considering an IPO of its Asian operations. 

Anheuser-Busch InBev Soars on Possible IPO of Asian Business
Bottles of beer move along a conveyor belt at the Anheuser-Busch InBev NV Budweiser bottling facility in St. Louis, Missouri, U.S.(Photographer: Luke Sharrett/Bloomberg)

(Bloomberg) -- Anheuser-Busch InBev NV shares jumped the most since 2015 after people with knowledge of the matter said the world’s largest brewer is considering an initial public offering of its Asian operations as a way to unlock value after a string of acquisitions left it saddled with debt.

The Leuven, Belgium-based maker of Budweiser has been talking with potential advisers about the possibility of listing its Asian business, according to the people. Any deal could raise more than $5 billion, the people said, asking not to be identified as the information is private.

Anheuser-Busch InBev Soars on Possible IPO of Asian Business

The shares rose as much as 7.2 percent, the most since September 2015, before trading up 3.4 percent to 63.32 euros in Brussels in the afternoon.

AB InBev may seek to value its entire Asian business at around $70 billion through the share sale, though the eventual figure would depend on market demand and growth prospects for the business, the people said. Deliberations are at an early stage, and AB InBev could opt against pursuing a transaction, according to the people.

An IPO will help to accelerate AB InBev’s deleveraging process as well as provide flexibility for deals including a potential buyout of Castel Group, Jefferies Financial Group Inc. analyst Edward Mundy wrote in a note.

A $70 billion valuation -- which would be 23 times its earnings, excluding some costs -- would be "quite rich," Mundy said. A valuation that’s 20 times its earnings would more reasonable, according to the analyst.

One potential adviser on the IPO estimated a valuation of $40 billion to $50 billion for the business. It’s typical for advisers to give a wide range of values this early in the process as they try to secure mandates from the owner, who may be seeking an even higher amount.

The world’s largest brewer has been looking to reduce borrowings following its purchase of SABMiller Plc for more than $100 billion in 2016. AB InBev shares fell 38 percent last year, making it one of the worst performers on the Euro Stoxx 50 index of European blue chips.

“We are always looking at opportunities to optimize our business and drive long-term growth, of course subject to our strict financial discipline,” a representative for AB InBev said in a statement, declining to comment on specific deals. “We are committed to our businesses in the Asia-Pacific region and excited about the potential in this geography.”

AB InBev hasn’t chosen a listing venue, though Hong Kong is a possibility, the people said.

Missed Expectations

Investors have been questioning AB InBev’s strategy after its third-quarter results missed expectations and the company halved its dividend. Asia Pacific contributed $2.3 billion of AB InBev’s revenue in the quarter ended Sept. 30, accounting for 17 percent of global sales, according to data compiled by Bloomberg.

Asia has been a key battleground for international brewers as consumption of mass-market lager slows in North America and Europe. The continent’s prospects dimmed slightly in the third quarter, with Heineken NV in October reporting its weakest Asian beer volume growth in three years.

AB InBev is the largest foreign beer maker in China, with a 16 percent share of the market in 2017, according to research firm Euromonitor. It has been focusing on selling higher-end brands in the country including Corona and beers made by Boxing Cat, a Shanghai-based craft brewer it acquired two years ago.

The Asia Pacific beer market is predicted to grow to $219 billion by 2022, up from $181 billion in 2017, according to Euromonitor.

AB InBev had 49 percent market share in 2017 in South Korea, where it owns brands like Cass, Euromonitor data show. The company bought South Korean brewer Oriental Brewery Co. in 2014 for $5.8 billion, regaining a business that it had sold to private equity several years earlier.

--With assistance from Thomas Buckley.

To contact the reporters on this story: Crystal Tse in Hong Kong at ctse44@bloomberg.net;Vinicy Chan in Hong Kong at vchan91@bloomberg.net;Ruth David in London at rdavid9@bloomberg.net

To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, Chitra Somayaji, Amy Thomson

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