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.