Hong Kong: AB InBev’s APAC unit delays pricing of its Hong Kong IPO

Budweiser Brewing Company APAC , the Asia-Pacific business of Anheuser-Busch InBev (AB InBev), will not price its Hong Kong IPO of up to $9.8 billion by July 12 as planned, Reuters reported citing two people with knowledge of the matter.

Budweiser APAC, whose portfolio of more than 50 beer brands includes Stella Artois and Corona, received offers below the HK$40-$47 ($5.13-$6.02) per share target from some large U.S. investors, other people familiar with the matter said.

The company's executives and representatives from the deal's co-sponsors, JPMorgan and Morgan Stanley , met in New York to discuss pricing after the books closed on July 11.

It was not immediately clear why there was a delay in pricing for a deal that had already been over-subscribed.

People familiar with the issue said it was struggling to secure enough demand from long-term investors, with some offers below the target range.

Typically investors put in orders for more shares than they actually expect to receive in an effort to ensure they get a good allocation. Deals where those investors end up with more than they really expected often trade poorly to begin with.

The company has until 11.59 pm (1559 GMT) on Monday, July 15 in Hong Kong to finalise its offer price, according to its prospectus. If it does not finalise the price by then, the IPO will lapse.

The Hong Kong Stock Exchange allows IPOs to price at as much as 10 percent below the indicative range, but this has to be announced in advance, which has not happened in this case. It can also not now change the offer size.

A spokesman for Budweiser APAC declined to comment.

All the sources who spoke to Reuters did so on condition of anonymity as they were not authorised to speak on the matter.

Budweiser APAC is seeking to raise between $8.3 billion and $9.8 billion through the float, much of which will go towards paying down debt at its highly leveraged parent. Trading is set to begin on July 19.

AB InBev, the world's largest brewer, has been working to reduce a debt pile of more than $100 billion that it built up with the purchase of nearest rival SABMiller in late 2016.

AB InBev has said it will reduce its net debt to EBITDA ratio to below 4 by the end of 2020 from 4.6 at the end of last year and that this is not dependent on the Asian flotation. It says the optimal ratio is 2.

However, analysts say the deal is already priced into AB InBev stock, which has rallied 36% this year, but is still down 11% over the last 12 months. It fell 1.5% on July 12.

The company has positioned its Hong Kong listing as creating a champion in Asia-Pacific, where sales are growing as increasingly wealthy consumers turn to premium beer brands.

Even at the low end of the price range, the IPO would surpass the $8.1 billion New York float of Uber in May, the biggest so far this year, Refinitiv data shows.

At a time when trade tensions are weighing on the big business of taking firms public, investor response to the Budweiser APAC IPO is being viewed as a barometer for other future large share sales, such as Alibaba's plans to raise as much as $20 billion through a Hong Kong listing.

On July 11, Reinsurance group Swiss Re suspended plans in London for a $4.1 billion IPO of British life insurer ReAssure on the day it was set to start trading, citing weak demand from institutional investors.

Last month, logistics real estate developer ESR Cayman Ltd shelved its up to $1.24 billion Hong Kong IPO "in light of the current market conditions".

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