AB InBev sells Carlton & United Breweries to Asahi for $16bn

Andrew Cummings
July 20, 2019

Anheuser-Busch InBev NV (BUD.N) bounced back quickly from the failed initial public offering of its Asian unit, selling Australian beer assets in a deal valued at A$16 billion (US$11.3 billion) and keeping alive the prospect of a share sale.

Key Points Anheuser-Busch InBev has agreed to sell its Australian operations to Japan's Asahi.

The AB InBev statement quoted chief executive Carlos Brito as saying that "we continue to see great potential for our business in APAC (Asia Pacific) and the region remains a growth engine within our company".

A Belgian-Brazilian behemoth built over decades of deal-making, AB InBev is saddled with more than $100 billion in debt, much of it stemming from its blockbuster 2016 acquisition of SABMiller.

AB InBev last week canceled the planned IPO of its Asian business, in which it aimed to raise almost $10 billion, citing market conditions, scrapping what would have been the largest IPO of the year. "Substantially all of the proceeds from the divestiture of the Australian business will be used by the company to pay down debt", AB InBev said in a news release. At the same time, they aren't high-growth markets, so selling them wouldn't hurt AB InBev's growth prospects, the person said.

The Budweiser APAC flotation would have been the largest of the year, with AB InBev expecting to raise up to $9.8 billion.

Sources close to the deal said investors had baulked at the price.

In addition, AB InBev continues to believe in the strategic rationale of a potential offering of a minority stake of Budweiser Brewing Company APAC Limited (Budweiser APAC), excluding Australia, provided that it can be completed at the right valuation.

"The valuation was much too expensive", he said.

The Budweiser brewer's stock rose 4% in premarket trading.

"AB InBev is well placed to capitalise on this upmarket shift as it leads the premium lager category in China with a considerable 43 percent volume share", she said. AB InBev's commitment to reach a net debt to EBITDA target ratio of below 4x by the end of 2020 is not dependent on the completion of this transaction.

Carlton & United, which also sells Victoria Bitter, accounts for nearly half the beer market in Australia, according to Bloomberg.

Lazard and Freshfields advised AB InBev on the Carlton & United sale.

The Japanese brewer, which has been seeking overseas deals to compensate for slow growth, said net debt would temporarily exceed four times EBITDA, with its debt to equity and capitalization ratios also expected to worsen.

It reported a drop of 14.7 per cent in 2018 profit at US$6.8 billion but has forecast strong growth this year.

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