Why Budweiser’s $10 Billion Asian IPO completely flopped


In a surprising turn of events, the world’s largest alcohol brewer couldn’t convince investors to put money in its Asian department. Anheuser-Busch InBev, the owner of Budweiser, ended up completely failing to pull off their originally planned initial public offering.

The listing, estimated at $10 billion, was a complete disaster. Making the matter worth is the fact that other Asian-based brewers, such as China Resources Beer, have been gaining, with that particular company gaining 34 percent in 2019 to date, while another brewer, Tsingtao, is up 52%. Despite such favorable market conditions, Budweiser’s failure was a particularly tough blow for the company.

At the moment, it seems that AB InBev was far too aggressive when it came to how aggressively they priced their IPO, which could have raised as much as $9.8 billion if it was successful.

Budweiser’s Asian business has an edge over local, Chinese companies in the fact that it has significantly higher margins than it’s rivals by focusing on premium brands. However, most of the company’s earnings don’t come from China, but rather in areas like South Korea and Australia, where growth is slower.

With this in mind, investors found the pricy valuation a bit too much to stomach, especially considering how large the deal would be. Even at the bottom end of its price range, Budweiser was going for a 59 percent premium to global brewers in terms of its enterprise value to EBITDA, according to The Wall Street Journal.

Now that the IPO has failed, AB InBev will likely take longer to pay off its debt now that it won’t have billions in extra cash sitting around. Perhaps worst of all, this failure will end up being a major dent for the company’s acquisition prospects.

Now that it won’t be able to use its shares as a currency for buying out other brewers, AB InBev will have to take on more debt, adding to the already significant amount of leverage the company has taken thanks to a series of megadeals over the past few years.

On the New York Stock Exchange, however, shares of Anheuser-Busch InBev didn’t seem to respond much to the adverse development. Although shares fell by 1.5 percent on Monday morning, they ended up rising by 1.9 percent by the end of the day.

For the past six months shares have continued to rise, growing by almost 30 percent from $70 per share to almost $90 in what’s been an impressive couple of quarters for a 40-billion-dollar company. Regardless, the company will need to do a better job in evaluating how eager investors are before giving the IPO another try.

Anheuser-Busch InBev Company Profile

Anheuser-Busch InBev SA/NV is the largest brewer in the world and one of the world’s top five consumer product companies, as measured by EBITDA. After the SABMiller acquisition, the company’s portfolio now contains five of the top 10 beer brands by sales and 18 brands with retail sales over $1 billion. AB InBev was created by the 2008 merger of Belgium-based InBev and U.S.-based Anheuser-Busch. The firm holds a 62% economic interest in Ambev and in 2016 acquired SABMiller. – Warrior Trading News