Anheuser-Busch scraps its US$9.8 billion IPO for Budweiser in Hong Kong, scuppering world’s largest fundraising plan of 2019
- The world’s brewer has cited ‘prevailing market conditions’ as one of the factors for its decision to scupper the IPO of its Budweiser unit
- The brewer will continue to evaluate its options to enhance shareholder value, Anheuser-Busch said in a statement
Anheuser-Busch InBev has scrapped what could have been the largest global initial public offering (IPO) of 2019 in Hong Kong, in a setback to the city’s plan to catch up with New York as the world’s fundraising hub.
According to its financing schedule, Anheuser-Busch had to price its Budweiser stock by Monday, for the shares to debut on July 19 in Hong Kong. Depending on the final pricing, Budweiser would potentially have raised US$8.3 billion to US$9.8 billion from the listing, surpassing Uber, which raised US$8.1 billion in New York in May to become the world’s largest IPO this year.
Global investors had subscribed for more than US$10 billion worth of Budweiser shares. About 70 per cent of these orders were from hedge funds who bought at prices near the bottom end and tend to hold for the short term, according to a fund manager who declined to be named.
The remaining investors were global long-only funds. Chinese long-only funds snubbed the offer in favour of Hong Kong-listed China Resources Beer, a brewing company headquartered in Beijing.
The lack of institutional support for the share had some investors worried that it might slip beneath its offer price during next week’s debut.
The offeror “wants to sell the share at HK$47 apiece, but the market sentiment seems to be inclining toward Hk$40 and that’s a huge discount,” said Louis Tse Ming Kwong, managing director of VC Asset Management. “So the major factor is fixing the share price at the right level.”
Another worry is that China’s consumption of beer and other alcohol could be dampened by a government crackdown on organised crime since the start of the year, which has hurt business at karaoke bars and late-night restaurants in cities across China.
“The listing could be suspended or withdrawn if the company cannot set the price on Monday,” said Steven Tse, senior equity research analyst at Hong Kong brokerage SBI China Capital.
The Hong Kong retail tranche of the offering, accounting for 5 per cent of the overall shares, was estimated by local brokerages to be 3.7 to 5 times oversubscribed, a tepid response in comparison to interest such mega listings have attracted from local investors in the past.
The huge scale of the listing led to a drop in local cash deposits, triggering a surge in Hong Kong’s interbank lending rate (Hibor), or the rate at which banks lend to each other. As interest rates rose, retail investors became less enthusiastic towards the listing offer, brokers said.
One-month Hibor spiked to 2.99 per cent late last week, the highest level since October 2008, before easing to 2.18 per cent on Friday.
Budweiser sells more than 50 beer brands in 39 territories, and counts China, Australia, South Korea, India and Vietnam among its key markets in Asia-Pacific.
The brewer is the largest by sales in China, according to data from industry consultancy GlobalData cited in Budweiser’s prospectus.
The company focuses on high-end beer, which represents the fastest-growing segment in the Asian market, according to GlobalData.
Proceeds from the listing would have been used to repay loans due to AB InBev subsidiaries, according to the listing prospectus.