IPO Expert On AB InBev's Canceled Go-Public Plan: It Wasn't Clear From Day One

Beer giant Anheuser Busch Inbev NV BUD will no longer proceed with the planned IPO of its Asian unit due to "several factors, including the prevailing market conditions."

What Happened

Budweiser's parent company was on track to hold the title of overseeing the world's most valuable IPO in 2019.

The now-cancelled IPO was poised to raise $10 billion through a listing in the Hong Kong market. It appears the company and its bankers were too aggressive in pricing the IPO, although its exposure to China yields superior margins compared to rivals, The Wall Street Journal reported.

Around 50% of Ab InBev's Asian business is exposed to more mature markets, including South Korea and Australia. These markets typically come with slower growth rates compared to markets like China and India, WSJ said. 

Why It's Important

Eric Krull, manager and founder at Krull Asset Management, LLC and co-author of "The Lifecycle Trade," was a guest offered his take on the failed IPO on Benzinga's Premarket Prep show Monday morning.

Krull said he neevr understood the logic of the IPO in the first place. 

It wasn't made clear if the parent company was spinning off a part of the business that was private into a new public listing or if Ab InBev was spinning off a part of the business into a new stock, he told Benzinga. 

The overall takeaway may be that the company views the state of the IPO market right now as "not being really great" at a time of near-historic all-time highs, Krull said. 

It's also possible Ab InBev cancelled its IPO due to the Sino-American trade war, he said. 

"Maybe they are not sure how they can actually pull this off." 

What's Next

Ab InBev's failed IPO will likely hurt its M&A plans moving forward, according to WSJ.

The beer giant could have taken advantage of its IPO and used the newly listed shares to buy rival beer companies in the region. Instead, the company may have to to issue more debt if it were to acquire more attractive assets in the region, such as Thai Beverage and San Miguel.

Ab InBev shares were trading higher by 1.59% at $88.32 at the time of publication Monday. 

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