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AB InBev Surprises Its IPO Bankers With $11.3 Billion Asahi Deal

Thomas Buckley, Vinicy Chan, Dinesh Nair and Crystal Tse
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AB InBev Surprises Its IPO Bankers With $11.3 Billion Asahi Deal

(Bloomberg) -- As investors pummeled Anheuser-Busch InBev NV’s stock and bonds after the Budweiser maker scrapped what would have been the year’s largest initial public offering, little did they know Chief Executive Officer Carlos Brito had a Plan B that’s been in the works for months.A week after pulling a share sale of its Asian business, AB InBev on Friday agreed to sell its Australian unit -- part of the portfolio that had been offered to investors -- to Asahi Group Holdings Ltd. A Hong Kong listing would have fetched as much as $9.8 billion; the sale to the Japanese company is valued at $11.3 billion.The Australian deal, spearheaded by Brito and his counterpart at Asahi, Akiyoshi Koji, was the culmination of several months of clandestine conversations, mostly in London, according to people familiar with the matter. The negotiations were limited to a handful of members of the Belgian brewer’s executive committee, its long-time bankers at Lazard Ltd. and senior management of Asahi, which was advised by Rothschild and Nomura Holdings Inc., the people said.The transaction surprised some members of separate banking teams -- led by JPMorgan Chase & Co. and Morgan Stanley -- that had been appointed by the world’s largest brewer to handle the listing of its Asian arm, the people said, asking not to be identified because of the sensitivity of the information. The IPO was expected to net as much as $170 million in fees for the top two advisers.Read this: Why Budweiser and Bankers Failed to Sell the King of IPOsThe high-stakes turnaround is emblematic of Brito’s dealmaking style -- leaving little to chance and considering all angles available. In 2016, he secured a $106 billion purchase of rival SABMiller that cemented the brewer’s global dominance. AB InBev slowly ingratiated itself with SABMiller shareholders by raising its offer in small increments via five separate bids, all the while structuring a tax-efficient offer for the two largest investors, the billionaire Santo Domingo family of Colombia and tobacco company Altria Group Inc.Not long after Bloomberg reported in January that AB InBev was considering the Asia IPO, Asahi began weighing an acquisition of Carlton & United, the Australian business. The division is highly profitable but shows less promise for growth than some of the Belgian company’s other regional operations.In recent years, a bond had formed between Brito and Koji, following the Japanese brewer’s acquisition of Pilsner Urquell, Peroni and Grolsch in separate deals to secure antitrust approval for the SABMiller purchase. The so-called megabrew purchase saddled AB InBev with a debt load that tops $100 billion, prompting the company to cut its dividend last year and explore the possibility of an Asian IPO or asset sales.In spring, seeking to keep the Australian division from forming part of the Hong Kong flotation, Asahi made an offer for it before AB InBev began its roadshow with JPMorgan and Morgan Stanley bankers. The Japanese company was looking to fuel its expansion beyond a stagnating, highly competitive domestic market. AB InBev instead chose to gauge the appetite for a listing that would include the Australian arm.Tense CallsConference calls between AB InBev’s management and the arrangers on the listing grew increasingly fraught in the middle of last week. By that point, it was becoming clear that interest from institutional investors and sovereign wealth funds had not met the brewer’s expectations, largely because of the valuation of the unit. AB InBev’s board decided to pull the IPO minutes before the company issued a press release last Friday, citing unaccommodating “market conditions.”One of the people who helped draft plans for the share sale of Budweiser Brewing Co. APAC said that if they had known about the talks going on with Asahi, the IPO bankers would not have worked so hard on the ill-fated deal. Another person called the process a waste of time.While the IPO bankers drowned their sorrows that evening, they held on to hope that the company would soon call back to try again with different terms. In fact, AB InBev executives were already on the phone with Lazard and Rothschild to proceed with conversations about the sale of Carlton & United.In its announcement of the sale to Asahi on Friday, AB InBev again dangled the prospect of renewing the listing plans. That’s unlikely to happen before next year, people familiar with the situation said. AB InBev’s shares rebounded Friday on news of the deal, gaining 5.5% in Brussels.Asahi’s advisers on the acquisition could earn as much as $35 million while the banks with AB InBev are poised to make as much as $40 million, according to estimates from Freeman Consulting Services.Representatives for AB InBev, Lazard, Rothschild and JPMorgan declined to comment. Morgan Stanley didn’t immediately have a comment. A spokesman for Asahi couldn’t be reached outside regular business hours.Once again, executives and bankers scrambled through the night on Thursday after media reports about Asahi’s potential interest. Having sealed the deal, they’ve planned a few rounds of drinks for Friday night.(Adds additional advisers in third paragraph.)\--With assistance from Fion Li, Manuel Baigorri and Liana Baker.To contact the reporters on this story: Thomas Buckley in London at tbuckley25@bloomberg.net;Vinicy Chan in Hong Kong at vchan91@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net;Crystal Tse in Hong Kong at ctse44@bloomberg.netTo contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, ;Kenneth Wong at kwong11@bloomberg.net, Eric PfannerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- As investors pummeled Anheuser-Busch InBev NV’s stock and bonds after the Budweiser maker scrapped what would have been the year’s largest initial public offering, little did they know Chief Executive Officer Carlos Brito had a Plan B that’s been in the works for months.

A week after pulling a share sale of its Asian business, AB InBev on Friday agreed to sell its Australian unit -- part of the portfolio that had been offered to investors -- to Asahi Group Holdings Ltd. A Hong Kong listing would have fetched as much as $9.8 billion; the sale to the Japanese company is valued at $11.3 billion.

The Australian deal, spearheaded by Brito and his counterpart at Asahi, Akiyoshi Koji, was the culmination of several months of clandestine conversations, mostly in London, according to people familiar with the matter. The negotiations were limited to a handful of members of the Belgian brewer’s executive committee, its long-time bankers at Lazard Ltd. and senior management of Asahi, which was advised by Rothschild and Nomura Holdings Inc., the people said.

The transaction surprised some members of separate banking teams -- led by JPMorgan Chase & Co. and Morgan Stanley -- that had been appointed by the world’s largest brewer to handle the listing of its Asian arm, the people said, asking not to be identified because of the sensitivity of the information. The IPO was expected to net as much as $170 million in fees for the top two advisers.

Read this: Why Budweiser and Bankers Failed to Sell the King of IPOs

The high-stakes turnaround is emblematic of Brito’s dealmaking style -- leaving little to chance and considering all angles available. In 2016, he secured a $106 billion purchase of rival SABMiller that cemented the brewer’s global dominance. AB InBev slowly ingratiated itself with SABMiller shareholders by raising its offer in small increments via five separate bids, all the while structuring a tax-efficient offer for the two largest investors, the billionaire Santo Domingo family of Colombia and tobacco company Altria Group Inc.

Not long after Bloomberg reported in January that AB InBev was considering the Asia IPO, Asahi began weighing an acquisition of Carlton & United, the Australian business. The division is highly profitable but shows less promise for growth than some of the Belgian company’s other regional operations.

In recent years, a bond had formed between Brito and Koji, following the Japanese brewer’s acquisition of Pilsner Urquell, Peroni and Grolsch in separate deals to secure antitrust approval for the SABMiller purchase. The so-called megabrew purchase saddled AB InBev with a debt load that tops $100 billion, prompting the company to cut its dividend last year and explore the possibility of an Asian IPO or asset sales.

In spring, seeking to keep the Australian division from forming part of the Hong Kong flotation, Asahi made an offer for it before AB InBev began its roadshow with JPMorgan and Morgan Stanley bankers. The Japanese company was looking to fuel its expansion beyond a stagnating, highly competitive domestic market. AB InBev instead chose to gauge the appetite for a listing that would include the Australian arm.

Tense Calls

Conference calls between AB InBev’s management and the arrangers on the listing grew increasingly fraught in the middle of last week. By that point, it was becoming clear that interest from institutional investors and sovereign wealth funds had not met the brewer’s expectations, largely because of the valuation of the unit. AB InBev’s board decided to pull the IPO minutes before the company issued a press release last Friday, citing unaccommodating “market conditions.”

One of the people who helped draft plans for the share sale of Budweiser Brewing Co. APAC said that if they had known about the talks going on with Asahi, the IPO bankers would not have worked so hard on the ill-fated deal. Another person called the process a waste of time.

While the IPO bankers drowned their sorrows that evening, they held on to hope that the company would soon call back to try again with different terms. In fact, AB InBev executives were already on the phone with Lazard and Rothschild to proceed with conversations about the sale of Carlton & United.

In its announcement of the sale to Asahi on Friday, AB InBev again dangled the prospect of renewing the listing plans. That’s unlikely to happen before next year, people familiar with the situation said. AB InBev’s shares rebounded Friday on news of the deal, gaining 5.5% in Brussels.

Asahi’s advisers on the acquisition could earn as much as $35 million while the banks with AB InBev are poised to make as much as $40 million, according to estimates from Freeman Consulting Services.

Representatives for AB InBev, Lazard, Rothschild and JPMorgan declined to comment. Morgan Stanley didn’t immediately have a comment. A spokesman for Asahi couldn’t be reached outside regular business hours.

Once again, executives and bankers scrambled through the night on Thursday after media reports about Asahi’s potential interest. Having sealed the deal, they’ve planned a few rounds of drinks for Friday night.

(Adds additional advisers in third paragraph.)

--With assistance from Fion Li, Manuel Baigorri and Liana Baker.

To contact the reporters on this story: Thomas Buckley in London at tbuckley25@bloomberg.net;Vinicy Chan in Hong Kong at vchan91@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net;Crystal Tse in Hong Kong at ctse44@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, ;Kenneth Wong at kwong11@bloomberg.net, Eric Pfanner

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.