Follow and star ↑↑「New Distribution」 See how many friends are following industry trends with you On September 12 (today), AB InBev announced on its official website that its Asia-Pacific subsidiary (referred to as "Budweiser APAC") has resumed its application to list a minority stake on the Hong Kong Stock Exchange. AB InBev stated that the decision to list depends on various factors and current market conditions, with J.P. Morgan and Morgan Stanley serving as sponsors for Budweiser APAC. However, Budweiser APAC's business no longer includes Australia, as AB InBev sold its Australian subsidiary to Asahi Group in July for $11.3 billion. After being "quiet" for two months due to the terminated listing, Budweiser APAC is now making a comeback. AB InBev has already submitted a new prospectus to the Hong Kong Stock Exchange. Budweiser APAC is the Asia-Pacific arm of AB InBev, the world's largest beer brand. As of March 31, 2019, its business comprised 62 breweries (including one cider brewery) and 73 distribution centers primarily located in China, Australia, South Korea, India, and Vietnam. AB InBev owns numerous beer brands, including global brands like Budweiser and Corona, international brands like Hoegaarden, and regional brands like Cass and Harbin Beer. Restarting the IPO Plan, Just Two Months After Initial Filing On July 5 this year, AB InBev formally launched the IPO for Budweiser APAC, its Asia-Pacific business, for listing on the Hong Kong Stock Exchange. According to the Budweiser APAC prospectus, its revenue for 2017 and 2018 was $7.790 billion and $8.459 billion, respectively, with gross margins of 55.7% and 55.2%, and net profits of $1.077 billion and $1.409 billion. Budweiser APAC stated in the announcement that the net proceeds from the global offering would be used immediately in full to repay loans owed to AB InBev group subsidiaries, completing the transfer of relevant subsidiaries from AB InBev to Budweiser APAC. The subscription period was originally scheduled to end on July 11, with an offer price range of HK$40 to HK$47 per share. Based on the upper end of the price range, the IPO could raise up to HK$76.447 billion, making it potentially the largest IPO of the year and possibly ever for a food and beverage company. During the first listing attempt, the corresponding P/E ratio was between 38.5 and 45 times. Although the company received oversubscription of about 11 times, institutional orders were insufficient. On July 13, AB InBev refused to lower the offer price due to disagreements with investment banks on pricing, ultimately leading to the suspension of the Asia-Pacific listing plan. Why Did Hong Kong's Largest IPO of the Year Fall Through? First, from the first day the prospectus was published, Budweiser APAC faced controversy over issues such as debt, massive goodwill, and the use of proceeds. The prospectus revealed several issues: Budweiser APAC had total debt of $2.634 billion, faced goodwill of $13.187 billion, and the purpose of the fundraising was to repay company debt. Among these issues, the market was most divided over the fact that Budweiser APAC stated from the outset that the net proceeds would be used entirely to repay loans from AB InBev group subsidiaries. This led to the listing being interpreted as a way to repay the parent company's debts, with some even joking it was "the son paying the father's debts." Image source: Prospectus Second, the prospectus showed that Budweiser APAC did not set up cornerstone investors. Generally, bringing in cornerstone investors affirms the fundamentals and future prospects of the listed company, thereby boosting market confidence. However, cornerstone investors are also required to commit to purchasing and lock up for 3 to 6 months after listing. But in this prospectus, Budweiser APAC did not have cornerstone investors. This might be because Budweiser APAC had excessive confidence in the offering, believing it could raise sufficient funds without cornerstone investors, or perhaps because the use of proceeds to repay parent company debt made it difficult to find good cornerstone investors. Finally, the pricing during the IPO may have been too high. According to media reports, a strategy analyst at Zhongtai International (Hong Kong) revealed that management demanded a high price, while institutional investors believed the valuation was too high and required a lower price. Neither side would compromise, so the IPO was terminated. At the time, Hong Kong Exchanges and Clearing CEO Li Xiaojia responded to the cancellation, saying that the market was initially pleased to see large projects listing in Hong Kong. Although the company's decision to shelve the listing disappointed the market, he believed that with the current sound market mechanisms, both issuers and investors would make the best choices. Delaying or stopping a listing is part of a company's development strategy and is a reasonable and normal choice, and the company's decision should be respected. Can Budweiser APAC, Positioned as Premium, Regain Market Confidence? The Asia-Pacific region, with its large population, high beer consumption, and faster growth than other regions, is currently in a phase of premiumization. Compared to other beer companies in Asia-Pacific, AB InBev holds a leading position. Budweiser APAC includes the East Asia-Pacific region (mainly Japan and South Korea, with Australia now excluded) and the West Asia-Pacific region (mainly China, India, Vietnam, and other Asia-Pacific countries). Its key markets include China, Australia, South Korea, India, and Vietnam. Among the seven global regions, Asia-Pacific has become the world's largest beer consumption market due to its large population base and urbanization, and it is also one of the fastest-growing regions in beer consumption. According to GlobalData, as of 2018, by volume and value, Asia-Pacific accounted for 37% of global beer consumption in 2018, and is expected to contribute 47% of global beer consumption growth from 2018 to 2023. Meanwhile, premiumization is a structural trend in the Asia-Pacific beer market. Compared to other global markets, the premium and super-premium beer categories in Asia-Pacific are relatively underdeveloped, and their growth is expected to significantly outpace the overall beer market in the region. 1. Budweiser APAC's Premium Positioning and Consumption Upgrade Promise Strong Performance The entire Asia-Pacific region has high beer sales volume, fast growth, and clear premiumization. Compared to other Asia-Pacific beer companies, Budweiser's Asia-Pacific business is very strong. According to GlobalData, AB InBev ranks first in sales value and volume in multiple Asia-Pacific countries and regions. As a key part of the Asia-Pacific market, the Chinese market is also undergoing premiumization. According to the prospectus, the Chinese beer market is the largest globally, accounting for 25% of global beer consumption in 2018; within the overall market, the premium and super-premium categories are growing faster than the overall beer market. AB InBev holds a leading position in China's premium beer market. Premium and super-premium beers show significantly higher growth rates in both volume and market value compared to the industry average, indicating a strong consumption upgrade trend. Budweiser APAC, positioned as a premium brand, achieved revenue and net profit growth of 8.59% and 30.83% year-on-year in 2018, respectively. This growth level gave Budweiser APAC shareholders great confidence in the offer price. 2. Doubts About Future High Growth and Excessive Fundraising Amount It is an indisputable fact that the beer industry's growth in both volume and market value will slow in the future, and the industry's shift toward premiumization is also undeniable. The low-end market will slow significantly, making premium beer a battleground for all brewers. This will intensify competition in the premium segment, and whether Budweiser APAC can maintain its current advantage in premium beer is uncertain. At least from Budweiser APAC's sales volume data, the foundation for maintaining high growth in the future is not solid. Its first listing application disclosed that its 2018 sales volume growth was only 2.1% year-on-year. For an industry that rarely raises prices, poor volume growth will make it difficult to achieve strong earnings growth. Additionally, the previous IPO aimed to raise up to $9.8 billion, with the upper limit exceeding a quarter of the total IPO funds raised on the Hong Kong Stock Exchange in 2018! Investors questioned whether the amount was too large. According to insiders, this time, AB InBev is targeting a new fundraising goal of $5 billion through its "slimmed-down" Asian subsidiary in Hong Kong. This is a significant concession from last time. Insiders say the company is currently in the stage of assessing investor demand, and the information is not public. Representatives of AB InBev declined to comment. New Distribution will continue to track further public reports on this matter. Compiled and edited by Payment of 400-2000 yuan will be provided for tips once adopted.