AB InBev in second bond sale to raise cash for SABMiller deal

BELGIUM – Anheuser-Busch InBev (AB InBev), the JSE’s newest listing, announced on Thursday it had dipped its fingers into capital markets for the second time since launching its formal bid to acquire rival SABMiller in November.

The bottlers of Budweiser and Stella Artois issued a $1.47bn bond in Taiwan, the proceeds of which would be used partly to fund its $108bn acquisition of the world’s second largest beer company.

The rest of the cash would be used for general corporate purposes, the company said.

The bond sale announced on Thursday followed AB InBev’s $46bn bond offering conducted in the US earlier this month, the second largest corporate bond sale on record.

Total orders for this bond issuance surpassed $100bn even though the company had planned to sell only $30bn worth of capital.

The strong investor showing at AB InBev’s US corporate bond offering reflected the general risk aversion that exists across global markets, which has steered investors away from equities and into safer havens such as bonds.

“The situation around the world presently is one of risk aversion. Investors are concerned about equities, but they are quite happy to buy bonds, especially quality corporate bonds,” Absa Investments analyst Chris Gilmour said.

Mr Gilmour said he had every reason to believe AB InBev’s latest capital raising would be successful, although he found it interesting that the company had chosen to do it in Taiwan and not in mainland China, where it had a stronger presence.

Afrifocus chief investment officer of private wealth, Eugene Chemaly, said low borrowing costs in developed markets would also work in the company’s favour during the capital-raising.

“Bonds generally perform well in a low interest rate environment when inflation expectations are falling,” he said, noting the nosedive in the oil price, which signalled that price increases would likely remain muted in global markets for some time.

Falling inflation generally translates into higher returns for bond holders.

Not all investors would be eligible to subscribe for the company’s 30-year bond, which will bear an annual interest rate of 4.915% and will be listed on the Taipei Exchange.

Restrictions in Taiwan stipulate that only institutional investors in that country can subscribe for the bond.

AB InBev said on Thursday its decision to issue formosa bond (a US dollar denominated bond issued by foreign companies in Taiwan) was to tap into its pool of investors who were focused on the long term.

“(These investors are) incremental to our current investor base, all of which is in line with our broader funding strategy of promoting investor diversification,” it said.

The Belgian brewer, which made its debut on the JSE last Friday — a move intended to facilitate its acquisition of SABMiller — expressed confidence that its capital-raising endeavour would be well-received.

“We believe the coupon and the notes mechanics are very appealing,” the company said.

Interest on the notes will be payable semi-annually in arrears on January 29 and July 29 of each year, commencing on July 29.

Eligible investors have until January 29 to subscribe for the bond.

January 22, 2016; http://www.bdlive.co.za/business/retail/2016/01/22/ab-inbev-in-second-bond-sale-to-raise-cash-for-sabmiller-deal

Leave a Reply

Your email address will not be published. Required fields are marked *