AB InBev keeps Asia IPO hopes as Asahi buys Australian unit

Mount Fuji stands beyond buildings as a visitor looks out at the skyline from an observation deck in Tokyo, Japan. (Bloomberg pic)

TOKYO: Anheuser-Busch InBev NV agreed to sell its Australian operations to Asahi Group Holdings Ltd. in a deal valued at AUS$16 billion (US$11.3 billion), and the Belgian company said it’s considering reviving an initial public offering of its Asian subsidiary.

The sale to Tokyo-based Asahi is expected to conclude by the first quarter of 2020, according to a statement Friday.

Carlton & United Breweries, whose brands include Foster’s and Victoria Bitter, accounts for almost half the beer market in Australia. AB InBev shares rose as much as 4.9%, the steepest gain in almost five months.

The deal gives Asahi a major entree into Australia, furthering its strategy to build a global presence. It also represents a major shift in AB InBev’s position in Asia as the brewer focuses on higher-growth markets.

The company last week pulled a planned IPO of its regional operations that aimed to raise as much as US$9.8 billion. Proceeds were to be used to reduce the company’s US$100 billion-plus in borrowings.

AB InBev said Friday that the IPO of Budweiser Brewing Co. APAC would still be strategic, provided it could achieve the right valuation. The proceeds from the Australian sale will go to reduce debt, the brewer added.

The sale values Carlton & United at 14.9 times adjusted 2018 earnings before interest, taxes, depreciation and amortisation, AB InBev said. The brewer didn’t give a breakdown of the unit’s equity and debt.

Asia IPO

“Selling down slower-growth assets like Australia should make the APAC IPO much more interesting to investors given the reduced mix of slower growth, mature-market beer assets,” wrote Nico von Stackelberg, an analyst at Liberum.

Asahi has rapidly expanded overseas in recent years, trying to build its flagship Super Dry beer into a global premium beer alongside the likes of Heineken NV as its domestic beer market languishes.

In January it acquired the beer business of the UK.’s Fuller, Smith & Turner Plc, following the 2016 acquisition of Pilsner Urquell and other brands from AB InBev.

The Belgian company acquired Carlton & United through the US$106 billion purchase of SABMiller. The Budweiser maker still has a major presence in Asia, particularly in China, though it’s facing challenges there amid shifting trends.

Younger consumers are moving away from traditional beers toward higher-priced craft brews and cocktails, while competition is spiking after rival Heineken forged a blockbuster deal with a state-owned company.

While Foster’s is well known internationally as an Australian brew, it’s much less commonly consumed in Australia than abroad. Heineken NV makes it in Europe under license.

“Selling Carlton & United Breweries to Asahi for about US$11.3 billion sheds a low-growth, high-margin asset, and allows for reinvestment into better growth markets,” says Duncan Fox, consumer products analyst for Bloomberg.

The bid for Carlton & United is the latest in Asahi’s overseas buying spree as the Japanese market shrinks. In January, the company announced a US$330 million purchase of the brewing business of Fuller, Smith & Turner Plc in the UK.

In 2016, it bought Peroni, Grolsch and Pilsner Urquell lagers from Anheuser-Busch and SAB Miller in separate deals worth around US$11 billion.

The deal will give Asahi a major boost in Australia. It is already the company’s second-largest overseas market behind Europe.

But its presence there has been overshadowed by Carlton & United and Kirin Holdings Co.’s Lion, which combined account for 90% of the market, according to market research firm IBISWorld.

Lazard and Freshfields advised AB InBev.