Belgian beer giant AB InBev has decided to cancel the IPO of its Asian branch: demand for the stock was expected to disappoint due to its launch price, which American investors thought was too high. The supposedly biggest FMCG flotation of all time therefore is no more.
Nine billion euros lost
19 July was supposed to be the date of the initial public offering of AB InBev's Asian branch (Budweiser Brewing Company). The IPO was thought to generate about 9 billion euros for the Belgian beer giant – one of the biggest in FMCG history. However, just before the weekend, CEO Carlos Brito announced the company would not be heading for the stock market after all because of "various factors" that remain unnamed. Only the "prevailing market circumstances" were explicitly referenced.
The brewery group was planning to invest the money to lower its colossal debt load, as well as to further growth in Japan. One of the causes for the multinational's 90 billion-euro debt load was the SABMiller acquisition in 2016.
Not enough interest
The real reason might be a lack of interest in the share, which analysts believe was too expensive. Instead of the targeted nine billion euros, the initial stock market value would only be about seven billion. According to Reuters, the initial price was was particularly disliked by American long-term investors, who were less willing to sign up than expected.
It was already remarkable that AB InBev valued the Asian subsidiary higher than the parent company itself: the brewery giant was pursuing an offering price of 16 to 18 times the gross company profit, while the AB InBev share itself only has an offering price of 11 times the profit.
Now, analysts are worried about the future of the company's debt. Brito will have to come up with a plan B quickly to reassure the banks and the shareholders. The announcement caused the share to plummet at the stock market.