Anheuser-Busch InBev’s Budweiser Brewing division is trying again at listing its Asian business as an IPO in Hong Kong. It cancelled out on the same effort two months ago, citing market conditions.
The company, which sells beer brands such as Budweiser and Stella Artois, has learned some lessons from the previous flop (ref WSJ). The earlier deal was to have been a plan to raise $9.8 billion and would have been the world’s largest largest IPO this year. This time, the deal size is smaller, around $5 billion. This is due in part because the company sold its Australian business to Japan’s Asahi for $11.3 billion a week after it scrapped its first IPO. The new deal will include cornerstone investors, which were not a part of the first IPO. These backers commit to invest a certain amount with a lockup period, wherever the deal is priced – the practice is common in Hong Kong IPOs and should assist the company in better anchoring demand. As well, the sale of the Australian business should help Budweiser get the high multiple it has wanted. Last time around, the company was trying to pitch the IPO as a growth story, but about half of its adjusted earnings came from mature markets, including Australia (ref WSJ). In the current filing, nearly three-quarters of its adjusted Ebitda comes from growth markets – primarily China, India and Vietnam. The Journal has indicated that AB InBev is much more profitable than its rivals in China because it focuses on premium brands. This factor should allow Budweiser Brewing to sell the IPO at a closer multiple to that of China Resources Beer, its largest rival in that country, which has an enterprise value equal to 21 times forward Ebitda. Diversified brewers generally trade well below that figure as does AB InBev, at 12 times Ebitda. Analysts say that Budweiser Brewing’s IPO should be a “go” this time around. Here’s to a round of Bud while we wait for the results to come in!