Shares of Anheuser-Busch InBev, the world's largest brewer, gained on Friday after a report that it was considering floating part of its Asian operations to help ease its debt burden.
Bloomberg reported on Friday that the Belgium-based maker of Budweiser, Corona and Stella Artois was considering the initial public offering to unlock value after a string of acquisitions drove up its debt.
AB InBev declined to comment on the accuracy of the report.
"In line with our culture, we always look at opportunities to optimise our business and drive long-term growth and we are very committed to our business in the Asia-Pacific region and excited about the potential of this geography," an AB InBev spokeswoman said.
Asian Business
Bloomberg said that any deal could raise more than $5 billion, with the whole of the Asian business valued at around $70 billion.
AB InBev shares, which fell by 38% last year, were up 5.4% at 1130 GMT, making them the strongest risers in the FTSEurofirst 300 index of leading European stocks
The company, which paid around $100 billion for nearest rival SABMiller in 2016, announced in October that it would be cutting its proposed dividend in half as beer sales fell in its largest markets of the United States and Brazil.
AB InBev is targeting a return to a net debt to EBITDA ratio of two times. Trevor Stirling, an analyst at Bernstein Research, estimated that this multiple was 4.7 at the end of 2018 and would fall to 4.3 at the end of 2019 and 3.7 at the end of 2020.
Analysts said that the $70 billion valuation, around half the market capitalisation of the whole company, appeared excessive.
At the nine-month mark in 2018, the Asia-Pacific region made up 20% of group volumes and 15% of AB InBev's underlying profit.
A Positive Development
Brokers RBC Europe noted that having a subsidiary partially owned by a minority was nothing new, given that it owned 62% of Brazilian brewer Ambev, but added it was "bemused" by the valuation figures.
"This takes a bit off the gloss of the headlines and share price reaction in our view. But nonetheless, we regard it as a positive development insomuch as it allays some concerns about AB InBev's indebtedness," it said.
Beyond debt reduction, Chinese brewers, such as Chinese Resources Beer Holdings Co, trade at higher multiples than AB InBev so a separate listing of its Asian operations could indeed unlock value.
About a third of AB InBev's Asia-Pacific profits come from China, with the rest mostly from Australia.
"It's also an insurance policy," said Stirling. "If you ever did run into serious problems on the Brazilian real or the Mexican peso then all you have to do is sell off another 10-15% and pay off a bit more debt."
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