Breakingviews: Budweiser’s IPO swagger turns into a drunk stumble

Anheuser-Busch InBev is stumbling at the bar. The Belgian brewer delayed pricing an up to $9.8 billion initial public offering of its Asia-Pacific business on Friday, hinting at poor demand for the year’s biggest float. Boss Carlos Brito and his bankers didn’t leave room for manoeuvre, setting a punchy price range and shunning cornerstone investors. The result is an early hangover.

The maker of Budweiser made a bold step toward public life in the Fragrant Harbour last week, handing out cans of non-alcoholic beer at a press conference to celebrate the launch of an IPO that could have valued its Asian unit at roughly $65 billion. But executives and bankers at JPMorgan and Morgan Stanley, the joint sponsors, may have been drinking the hard stuff when they set the price range.

A valuation of 17 times expected 2019 EBITDA would have valued Budweiser Brewing Company APAC in line with peers, according to Breakingviews calculations, but that was at the very bottom end of the range, leaving little room for downside in a volatile market unnerved by a U.S.-China trade war. The company also decided not to use large investors to anchor the deal, a common feature of Hong Kong IPOs, to help cover the books and ensure liquidity for global institutional investors.

All of that now seems overly bold. The company guided potential investors toward the bottom end of a marketed pricing range earlier this week, but the failure to fix the price on July 11, U.S. time, as per an earlier term sheet for the offering, suggests bids perhaps came in lower from the types of marquee, long-only global fund managers every company wants in its books.

Advisers need to file with the Hong Kong stock exchange no later than the morning of the last day of book building if they want to price below the range, and that deadline has passed. Budweiser APAC technically has until Monday to price. Still, the disrupted timeline sours the tone for a debut which, if it still happens, will almost certainly now prove volatile. AB InBev’s swagger has turned into a stumble.

Request a free trial of Breakingviews here