Anheuser-Busch InBev is looking to spinoff an acquisition to reduce its large debt burden.
Belgian beer giant Anheuser-Busch InBev has unveiled plans to spin off its Asia business—Budweiser Brewing Co. APAC—via a Hong Kong initial public offering (IPO) in a bid to reduce debt and take on Asian rivals.
The company—which owns brands such as Budweiser, Corona, and Stella Artois—has a $102.5 billion debt burden it is looking to reduce following its 2016 purchase of rival SABMiller for over $100 billion. The company did not disclose the value of the deal in its draft prospectus but analysts have said the float could be worth anywhere between $4 billion and $7 billion, valuing the unit as much as $70 billion.
AB InBev borrowed a record $75 billion to buy SABMiller. As a result, the US-listed brewer is currently the most indebted company in the global food and drinks industry by a significant margin. The company has thus far struggled to whittle down its debt obligations. In December of 2018, Moody’s cut its senior unsecured debt rating to Baa1. In January 2019, the company issued corporate bonds worth $15.5 billion to pay off part of its debt. The multinational’s financial situation comes at a time of growing anxiety about corporate debt in US and globally. In November last year, the Securities Industry and Financial Markets Association revealed that the US corporate debt had grown by 86% over the past decade from $4.9 trillion to $9.1 trillion.
News of AB InBev’s planned listing coincided with the company’s quarterly earnings call last week. In a statement, the company said it expects to reduce net debt to EBITDA ratio from 4.6x to below 4x by 2020. CFO Felipe Dutra indicated in a statement that further capital raised could also go to fuel the company’s Asia growth: “The merits of this initiative are based upon the creation of an APAC champion in the consumer goods space.” He added the firm’s “superior portfolio of brands and leadership” in the industry made it a good platform for further acquisitions.
The company has a lot of catching up to do. AB InBeV—which holds exclusive rights as the China distributor for Japan’s Sapporo beer—is currently the number three brewer in Asia’s biggest market. Its biggest rival in China is Dutch beer giant Heineken. Shortly before merging into AB InBev, SAB Miller had to shed its mainland business—China Resources Beer—as part of antitrust regulations. Heineken then took the opportunity to enter into a operational tie-up with business, taking a 40% stake in CRB last year. AB InBev also sold several European brands to Japanese beer maker Asahi in 2017 for $7.3 billion, which in turn took those brands into China.