World: AB InBev reportedly weighing asset sale after failed IPO

Anheuser-Busch InBev is weighing asset sales, including its operations in Australia and South Korea, in a bid to pay down some of its $106 bln in debt after a failed attempt to list its Asian business, the Financial Times reported on July 18 citing people briefed about the matter.

This “Plan B” aims to raise at least $10 bln, said one person informed about AB InBev’s plans for the disposals.

If completed, they would help speed deleveraging at the world’s biggest brewer, the home of brands including Budweiser, Stella Artois, Leffe and Brahma. After splashing out £79 bln to buy rival SABMiller, AB InBev’s ratio of net debt to earnings before interest, tax, depreciation and amortisation stood at 4.6 times at the end of 2018, and it aims to cut it down to 4 times by the end of 2020.

AB InBev can also pay down debt simply from the cash generated from selling one of every four beers drunk worldwide. Bernstein analysts estimate it can pay down about $7 bln in net debt annually, while maintaining its dividend at current levels. It cut its dividend in half last October, and refinanced its debt to push out maturities in February.

A number of rival brewers and private equity investors approached AB InBev earlier this year to buy some of its Asian assets but the company, led by Carlos Brito, opted for an IPO instead as the Brazilian chief executive was convinced it would have raised more cash.

The company declined to comment.

The assets being considered for sale were included in the botched initial public offering of Budweiser Brewing Company APAC, which was withdrawn on July 12 after investors balked at paying the mooted valuation of up to $63.7 bln. Australia and Korea made up the more mature side of Budweiser APAC, with higher margins but lower growth than the Chinese operation, which was the more highly valued growth business.

Australia and Korea generated almost two-thirds of Budweiser APAC’s 2018 revenue of $8.5 bln and just over half of earnings before interest, tax, depreciation and amortisation of $2.8 bln, according to the IPO filing.

Two people briefed about AB InBev’s strategy said that company was pursuing asset sales despite believing that the pressure to deleverage had come down in recent weeks with the US Federal Reserve expected to lower interest rates. Such a move would be a big boost to AB InBev because it relies on emerging markets for two-thirds of its profits and adverse currency effects hurt its ability to pay back its dollar-denominated debt last year.

The Wall Street Journal first reported news about a potential asset sale.

The aborted IPO had been expected to trump ride-hailing company Uber as the biggest IPO of 2019. AB InBev’s troubled IPO follows the decision this week by Swiss Re to pull the £3 bln flotation of ReAssure, its UK life insurance business, blaming weak investor demand. That would have been the biggest IPO in the UK this year.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .