FILE PHOTO: The logo of AB InBev is pictured outside the brewer's headquarters in Leuven.

Anheuser-Busch InBev kicked off the year’s biggest initial public offering (IPO), a sale of shares in its Asia Pacific beer unit that could raise as much as $9.8 billion (R138.25bn) and top Uber Technologies Inc’s May listing.

The Hong Kong IPO consists of 1.63billion shares of Budweiser Brewing Company offered at HK$40 (R72.24) to HK$47 each, according to terms of the deal obtained yesterday. Trading is expected to start on July 19.

The price range represents a market value of as much as $64bn for Budweiser Brewing, on par with that of Heineken, the world’s second-largest brewer.

The listing will enable acquisitions by creating a “local champion” and will help AB InBev reduce its debt, chief financial officer Felipe Dutra has said.

AB InBev shares rose 1.7percent yesterday morning in Brussels. They have gained 38 percent this year.

The company is counting on the region’s growth potential to draw interest in the shares as the beer business faces stagnating prospects elsewhere.

AB InBev has already cornered the premium market in China and has been buying up local craft brands to reach fashionable millennials with a taste for more expensive brews.

The range values Budweiser Brewing at 28.5 to 33.5 times consensus 2020 earnings, according to terms of the deal obtained. Heineken trades as 20.2 times that year’s estimated profit, while China Resources Beer Holdings is valued at 37.2 times, data compiled shows.

The valuation is “reasonably punchy,” wrote Société Gé* érale analyst Toby McCullagh.

A sale at the top end could result in a 10percent reduction of borrowings and help the company get net debt below a target of four times earnings one year earlier than planned, he added.

The Belgian brewer is among multinational companies that are reviewing their business strategies in Asia amid fierce competition from local rivals.

French hypermarket operator Carrefour has agreed to sell a controlling stake to China’s Suning.com, while German food retailer Metro has put its Chinese operations up for bidding.

The IPO could give AB InBev more flexibility to seek local partners, a strategy the brewer has deployed in Latin America with its AmBev unit.

Heineken has formed a partnership with China Resources, challenging AB InBev’s position as the largest foreign brewer in the world’s biggest market.

The Asia-Pacific unit had net income of $1.4bn in 2018, up from $1.1bn a year earlier, according to a preliminary prospectus.

The market value is within previous expectations for $40bn to $70bn. At $9.8bn, Budweiser Brewing’s sale would rank as the biggest IPO this year, surpassing Uber’s $8.1bn offering in May, according to data.

AB InBev is still trying to reduce the debt it amassed through its purchase of SABMiller for more than $100bn.

S&P Global Ratings said in March that it may cut its credit rating after Moody’s Investors Service downgraded AB InBev one level late last year.

JPMorgan Chase & Co and Morgan Stanley are joint sponsors for the Hong Kong share sale.

They’re scheduled to price the offering on July 11. 

Bloomberg