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AB InBev scraps the year's biggest IPO after finding soft demand

Brewer had planned to sell minority stake in its Asian business

A horse-driven Budweiser cart circles a baseball field in Phoenix Arizona. The Hong Kong listing is crucial to AB InBev’s effort to repair its balance sheet.   © Reuters

LONDON/NEW YORK (Financial Times) -- The world's largest brewer, Anheuser-Busch InBev, has scrapped the planned float of its Asian business after encountering weak investor appetite for what would have been the biggest initial public offering of the year.

AB InBev had been seeking to sell a minority stake in Budweiser APAC -- which markets 50 brands including Budweiser and Stella Artois in China, Australia, South Korea and Vietnam -- for up to $9.8 billion.

In a statement on Friday ABI said that, "at this time," it was "not proceeding with this transaction." It said several factors were to blame, including "prevailing market conditions."

The deal 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 billion pound flotation of ReAssure, its UK life insurance business, blaming weak investor demand. That would have been the biggest IPO in the UK this year.

The listing had been seen as crucial to AB InBev's effort to repair its balance sheet after an acquisition spree that took its debt up to more than $100 billion. By listing its Asian business, the brewer hoped it could entice investors with the faster growing side of its business and use the listed company as a vehicle to acquire regional rivals.

"You would assume that they have prepared very well for this -- it's a bit of a surprise to see this happening," said Robert Jan Vos, analyst at ABN Amro.

ABI's statement added: "The company will closely monitor market conditions, as it continuously evaluates its options to enhance shareholder value, optimize the business and drive long-term growth, subject to strict financial discipline."

AB InBev had been seeking to list 1.6 billion primary shares in a deal that would have valued the business at between $54.2 billion and $63.7 billion.

Analysts however questioned whether the company was seeking too rich a price for its shares. Jefferies and Bernstein Research, which are not involved, reckoned it was only worth $45 billion to $55 billion.

Bernstein analysts wrote last week that they saw "limited value upside even at the bottom of the range" that AB InBev had set, implying that the initial pricing was a stretch. In a poll Bernstein conducted among investors, it found "peak appetite" from respondents came in at HK$38 to HK$40 per share, 2% below the bottom end of the proposed pricing range.

Carlos Brito, AB InBev's chief executive, told the Financial Times in an interview in late June that he would only move ahead with the share sale if the terms were good for the company.

Asked why he would want to sell a chunk of business in what has been the company's fastest-growing region, he responded: "We're not giving away anything. If we do it, we are only going to do it if the price is right and if the market prevailing conditions are right."

Budweiser APAC includes a fast-growing business in China, as well as a more mature, profitable one in Australia and South Korea. The latter generated almost two-thirds of last year's revenue of $8.5 billion and just over half of earnings before interest, taxes, depreciation and amortization of $2.8 billion, according to the IPO filing.

But China is expected to be the main growth driver as the burgeoning middle class trades up from local brews to foreign ones such as Budweiser, which are positioned as premium brands.

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