CUB owner to begin talks into partial sale

Bloomberg reports AB InBev, the owner of Carlton & United Breweries (CUB), will meet with investors next week to gauge interest in selling a minority share of its Asia-Pacific business.

Budweiser Brewing Company APAC is the Asia Pacific unit of AB InBev and is gearing up for a Hong Kong initial public offering.

The deal could be worth at least $US5billion.

Budweiser Brewing Company APAC Limited is the largest beer company in Asia Pacific by retail sales value. It produces, imports, markets, distributes and sells a portfolio of more than 50 beer brands, which it owns or has licensed, including Budweiser, Stella Artois and Corona, Hoegaarden, Cass, Great Northern, Harbin and Victoria Bitter. Its principal markets are China, Australia, South Korea, India and Vietnam.

Net income of the Asia business was $1.4billon in 2018, AB InBev filings show, as compared with $1.1billion in 2017. Revenue for 2018 was $8.5billion, representing 6.1% organic growth.

AB InBev said it had seen market share in the Australian beer market increase to 48.8% in 2018, from 44.8% in 2013.

Analysts have said that $40 billion-$50 billion would be a reasonable valuation for the Asia-Pacific business.

“The move comes as the Belgium-based giant is working to reduce a $102.5 billion debt pile accumulated following the late 2016 purchase of rival SABMiller for around $100 billion,” Reuters notes.

 “The merits of these initiatives are based upon the creation of an APAC champion in the consumer goods space,” Chief executive Carlos Brito said. “Furthermore, our superior portfolio brands and leadership position in the beer industry provide them attractive platform for potential M&A in the region.”

Asia is the largest beer consumption region for AB In Bev by volume, accounting for 37% globally, and also one of the fastest-growing markets, the company said in its draft prospectus.

The region produced 18% of AB InBev’s sales by volume and 14% of its underlying operating profit last year from sales worth $8.46 billion, according to the prospectus.

According to Bloomberg, Budweiser plans to use all the proceeds from the Hong Kong offering to repay debt in Korea in full and a shareholder loan to AB InBev partially.

The ongoing China-US trade war may bring risks to the IPO, which could have a material adverse effect on its business, the company said.

"The imposition of tariffs on agricultural products, raw materials or other items imported from the US and other parts of the world could require us to increase prices to our customers or, if unable to do so, result in lowering gross margin on products sold," it noted.

It added that only a small portion of its raw materials are sourced from the US, and it is able to source comparable alternatives within the Asia Pacific and from other parts of the world.