CUB owners poised for Hong Kong stock market spin-off

Belgian brewing giant Anheuser-Busch InBev, which owns Australia’s largest brewer Carlton & United Breweries, is poised to list its Asia Pacific business on the Hong Kong Stock Exchange.

Filing application documents last week, AB InBev announced it will offer a minority share of its APAC business to market investors. AB InBev will retain a controlling stake in the business and the move is seen as a means to offset debts from years of expensive acquisitions.

The spin-out could raise an estimated US$5bn (AU$7.17bn) insiders say.

Analysts at market insights firm Jeffries suggested a total valuation for the company of between US$40 and US$50 billion (AU$57.3- $71.7 billion).

As a result, the Budweiser Brewing Company APAC Ltd, incorporated in the British Overseas Territory of the Cayman Islands, will become a separate entity from AB InBev. In order to prevent future competition, the two entities have signed a deed of non-competition.

Australia’s Foster’s Brewing Group and its subsidiaries, including CUB, will become indirect subsidiaries of the bigger group, which employs 31,000 people across the Asia Pacific Region.

In 2018 AB InBev’s Asia Pacific region revenues reached US$8.5bn (AU$12.2bn), up from US$7.8bn (AU$11.2bn) in 2017.

The company said that the Initial Public Offering (IPO) could be a precursor to further merger and acquisition activity in the region.

It said that its business was an “attractive platform” to pursue M&A activity and that the flotation could be a “catalyst for our ability to explore such inorganic expansion opportunities in Asia Pacific”.

Work has already begun splitting off the business, including its Australian group companies, which collectively own and produce Great Northern, Victoria Bitter and Pure Blonde, and craft brands Yak Ales, Pirate Life and 4 Pines.

It also holds licences for international brands Corona and Stella Artois with 40 per cent of Budweiser Brewing Company APAC’s net revenue derived from imported brands.

The move comes as AB InBev attempts to reduce its debt pile of around AU$146bn.

This debt built up following a series of acquisitions, including the US$100bn (AU$143.4bn) SAB Miller merger in 2016, which brought the Fosters and CUB brands under the AB InBev umbrella. The company insisted, however, that meeting their net debt reduction targets was not dependent on selling the minority stake.

Last week AB InBev reported restated Q1 revenues of US$13.1bn, an overall growth of 5.9 per cent. However, in Australia, it saw single-digit revenue decline, which it says was driven by lower volumes due to the later timing of the Easter holiday as well as “softer industry performance amidst declining consumer confidence”.

Australian markets

As part of its application to the Hong Kong Stock Exchange, Budweiser Brewing Company APAC provided an overview of its position in the Australian and Asian markets.

It reported that, with around 50 beer brands and 62 breweries in the region, it is the biggest beer company in Asia Pacific.

AB InBev said it had seen market share in the Australian beer market increase to 48.8 per cent in 2018, from 44.8 per cent in 2013. Conversely, its major competitor Lion Nathan, owner of the XXXX, Tooheys, James Squire and Little Creatures brands, saw its market share dip from 45.7 per cent in 2013 to 36.4 per cent in 2018.

Australia remains one of the most profitable beer markets globally. Great Northern is reportedly the company’s most popular Australian brand, following rapid sales growth over the past few years.

However, beer industry volumes in Australia – a high maturity market – have been “relatively flat”, despite beer making up 65.3 per cent of the overall drinks market, highlighting the pressures facing the major brand.

The company also said that Australian customers were becoming more health-focused, with a preference for low-calorie and low-alcohol beers.

Premium and super premium beer brands have shown “robust” growth as a result, and as a group, it said it was well positioned to cater to this trend, with low-calorie beer offerings Pure Blonde and no-alcohol product Carlton Zero.

It said that consumer tastes are continuing to shift towards locally-produced beer from craft breweries, a trend which it has attempted to keep up with, launching the Yak Ales craft beer brand and acquiring craft breweries 4 Pines and Pirate Life. Cider was also highlighted as a potential area for growth.

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