Tokyo’s Asahi shares drop on $11.3b AB InBev Australia deal

The logo of Anheuser-Busch InBev is pictured outside the brewer's headquarters in Leuven, Belgium February 28, 2019. Photo: Reuters

Shares of Asahi Group Holdings Ltd. fell the most in more than a year after the Japanese brewer unveiled a $11.3 billion deal to buy Anheuser-Busch InBev NV’s Australian operations.

The deal announced Friday to purchase AB InBev’s Carlton & United Breweries gives Asahi a major entree into Australia, furthering its strategy to build a global presence. But the stock move indicates investors are concerned that Asahi is paying top price for a region that is showing slow growth.

Asahi shares dropped as much as 6% in early trading in Tokyo on Monday, the biggest intraday decline since February 2018. The stock had gained 18% this year before Monday.

Analysts at SMBC Nikko said the deal “seems quite pricey” given the maturity of the Australian market. The sale values Carlton & United at 14.9 times adjusted 2018 earnings before interest, taxes, depreciation and amortization, according to AB InBev.

Asahi has rapidly expanded overseas in recent years, seeking to build its flagship Super Dry beer into a global premium beer alongside the likes of Heineken NV as its domestic beer market languishes. Australia is already Asahi’s second-largest overseas market behind Europe. But its presence there is small compared with its peers. Carlton & United, whose brands also include Victoria Bitter, accounts for almost half of Australia’s beer market.

“The market may have a negative reaction in the near term owing to the dilution and increase in debt,” Tomonobu Tsunoyama, an analyst at Mitsubishi UFJ Morgan Stanley, wrote in a note to clients. However, he said, “Asahi Group is confident the deal will help it to grow overseas via the addition of premium labels and greater cross-selling initiatives.”

He noted that Australia is one of the few developing countries with a growing population, and unlike Japan, a shift to premium categories is driving growth in the nation’s beer market.

Asahi’s is expanding abroad as its domestic market languishes — 2018 marked Japan’s 14th-straight year of beer shipment declines.

Asahi plans to fund the transaction with a share sale of as much as 200 billion yen ($1.9 billion), subordinated bonds and a 1.2 trillion yen bridge loan.

Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.