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Nikkei Markets

Budweiser dents outlook for large IPOs in Hong Kong

Cancellation threatens city's status as world's largest market for new listings

The IPO of Anheuser-Busch InBev's Asia Pacific unit was expected to be Hong Kong’s largest IPO this year.   © Reuters

HONG KONG (Nikkei Markets) -- The decision by Anheuser-Busch InBev to pull the plug on a multibillion-dollar share offering in Hong Kong by its Asia Pacific unit could nudge other big companies that aren't desperate for cash to delay their listing plans, weakening the city's standing as a fundraising center.

The news that Budweiser Brewing Company APAC has canceled its initial public offering comes at a challenging time for Hong Kong. Market sentiment is sagging as political troubles add to the overhang from the trade war. Meanwhile, funding costs have surged.

The city's status as the world's biggest market for IPOs is now at risk, said Kevin Leung, director for global investment strategy at Haitong International Securities.

The Budweiser Brewing IPO was slated to be Hong Kong's largest this year.

According to Louie Shum, the Hong Kong-based chief executive at Sincere Securities, market players expected a successful listing by the company to serve as a catalyst, drawing more foreign enterprises to list in the city.

While announcing its decision about the IPO on Friday, AB InBev, the world's largest beer maker and the controlling shareholder in Budweiser Brewing, referred to several factors, including prevailing market conditions, as reasons.

The cancellation came after a source familiar with the matter said last week that Budweiser Brewing's issue could be priced toward the lower end of an indicative range, a sign investors weren't comfortable with valuations at higher prices.

Coming just weeks after property developer ESR Cayman postponed its $1.24- billion IPO in Hong Kong, Budweiser Brewing's decision is seen hurting the outlook for large share listings in the city, one of the busiest marketplaces for IPOs. ESR gave no reason for its decision.

Among the high-profile names slated to come to market is e-commerce major Alibaba Group Holding. The company plans to raise $10 billion through its secondary listing in Hong Kong, lower than the $20 billion that media had reported earlier, Caixin Global said on its website last month, citing a source close to the deal. A spokesperson for Alibaba, which hasn't officially confirmed plans for a listing in the city, declined to comment on market speculation.

Haitong's Leung said that while the number of new listings in the city was unlikely to be hit sharply, the pipeline of large companies seeking to raise funds could shrink.

"Large IPOs, where the managements think they may have the luxury of time to wait for better pricing, may delay" coming to the market, Leung said. "The management of Budweiser is not urgently asking for money. Even though the fundraising is aimed at repaying debt," it can afford to wait for better timing, he said.

New listings in the city raised as much as HK$288 billion ($36.9 billion) in 2018, overtaking New York and making it the largest in the world.

Besides concerns about the impact from Sino-American trade tensions, the long drawn out political protests in Hong Kong over a controversial extradition bill has also contributed to the weak sentiment toward large IPOs.

Gross proceeds from the Budweiser Brewing offering would have amounted to about $8.4 billion even at the lower end. At that size, the issue would have ranked above that of ride-hailing service Uber Technologies, which raised $8.1 billion from its U.S. offering.

Net proceeds from the offering were intended to be used to repay the company's loans to parent AB InBev group as part of a reorganization.

"I think the main reason they came to Hong Kong is to attract mainland money. Yet, private investors may be reluctant to participate in IPOs at present as onshore liquidity tightens," said Shum of Sincere Securities.

-- Amy Lam

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