Ab Inbev Cancels $9 Billion-plus Hong Kong Ipo Due To Weak Investor Demand

Posted: Jul 16, 2019

AB InBev cancels planned IPO of stake in Asian business

Cites market conditions among reasons

U.S. ‘long-only’ investors balked at pricing, sources say

Hong Kong lagging New York as leading IPO location

HONG KONG/NEW YORK/BRUSSELS, July 15 (Reuters) - Scepticism over AB InBev’s high valuations doomed Budweiser APAC’s IPO of up to $9.8 billion - poised to be the world’s biggest this year - investors and bankers said, putting would-be floats on notice that careful pricing remains key to success.

Anheuser Busch InBev NV (AB InBev), the world’s largest brewer, dramatically shelved the initial public offering (IPO) of its Asian business on Friday, citing market conditions among other factors.

After a week-long global roadshow, the shares had been due to price in New York on Thursday evening and to begin trading in Hong Kong later this week.

The deal was expected to raise $8.3 billion to $9.8 billion for AB InBev, helping the heavily indebted brewer reduce its leverage, and giving Budweiser APAC a market capitalisation of $54 billion to $64 billion.

Sources involved in the deal said investors were unwilling to accept AB InBev’s valuations for Budweiser APAC. Another source added that the reluctance led to weak orders from top-class U.S. “long only” fund managers - prized as long-term investors - who had been expected to place big orders.

“The Company and banks all counted on long-onlys to make big orders,” said one source involved in the deal, who was not authorised to speak publicly on the matter and so declined to be identified. “Many long-onlys got cold feet and didn’t show up on the last day as expected.”

Brussels-based AB InBev, Morgan Stanley and JPMorgan, the two lead banks on the deal, and representatives for Budweiser APAC declined to comment.

AB InBev shares, which closed down 1.5% on Friday after reports on a possible delay, were trading 1.7% lower on Monday, making them among the weakest performers in the FTSEurofirst 300 index of leading European stocks.

Observers noted, however, that markets were currently buoyant. Last week the S&P 500 closed above 3,000 for the first time - up 20% this year - while in Hong Kong the blue-chip Hang Seng Index has gained 10% this year.

“This is likely a case of valuation push-back, not market conditions,” said Kathleen Smith, founding principal at Renaissance Capital, a U.S.-based research firm and manager of IPO-focused exchange-traded funds, who noted that returns from IPOs had generally been strong this year.

“If these returns were negative, that would be a sign that market conditions are an issue in getting IPOs done. For now I would say we have an operating IPO market with cautious investors - that’s a good balance: not too hot, not too cold,” she added.

With the notable exceptions of ride-hailing companies Uber Technologies Inc and Lyft Inc, which are trading below their issue prices, more than three-quarters of big IPOs in New York have produced gains for investors, according to data from Dealogic.

In Hong Kong, eight of the top 20 deals are trading higher including the city’s biggest this year, Hansoh Pharmaceutical Group Co Ltd which is up 68%.

By Julie Zhu, Joshua Franklin and Philip Blenkinsop
July 15, 2019

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