Anheuser-Busch InBev NV blamed market conditions for its decision to pull what would have been the world’s biggest initial public offering this year. Yet the brewer should take at least someresponsibility. This concoction was far too frothy for investors when Asian economies face an array of sobering realities.

AB InBevsaidit will no longer proceedwith theIPO of its Asia-Pacific business, Budweiser Brewing Company APAC Ltd., which had been aiming to raise as much as $9.8 billion in Hong Kong. The company’s American depositary receipts fell as much as 4.9% in New York before closing down 3% on Friday.

The offeringvalued Budweiser Brewing between 15.5 times and 18.2 times earnings before interest, tax, depreciation and amortization –well above the multiples for Carlsberg A/S and Heineken NV, and a premium to shares of the parent. The price range of HK$40 to HK$47 ($5.11to $6.01) a share would have resulted in a market capitalization of $54.2 billion to $63.7 billion.

You can hardly blame investors for wanting to sit this one out. The U.S.-China trade war is at an impasseand the ripples are widening.Singapore, a bellwether for global trade, on Friday posted its sharpest growth declinesince 2012. While the Federal Reservehas signaledthat interest rate cuts are coming, which has buoyed U.S. stocks, that’s also drivinga wedge between the world’s biggest economy and the rest.

This split is perhaps nowhere more apparent than theIPO market. Listings in the U.S. are on track for their best year since 2014. Hong Kong, the top destinationlast year, is languishing by comparison, after a series of high-profile bloopersincluding smartphone maker Xiaomi Corp. in July 2018 and food-delivery giant Meituan Dianping in September. As I’ve argued, reclaiming that crown will be an uphill battle; and now Hong Kong is facing competition from Shanghai fortech IPOs. Alibaba Group Holding Ltd.’s secondary listingplan is a ray of light –but this latest kerfuffle could dim any optimism.

Against this dismal backdrop, it’s little wonder things went south. Yet it’s a mistake to overlook AB InBev’s ownmissteps. For one thing, the company marketed itself as a purveyor of high-end beer, taking cues from Chinese consumers’ growing taste for foreign brands and craft labels. Perhaps its price range doesn’t look so out of whack when you consider the country’s brewers tradeanywhere between 15 times and 21 times, according to Bloomberg data. Yet investors just weren’t convinced that demand would hold up in a slowing economy. The company’s China pitch also ignoredmature markets likeSouth Korea and Australia, whichmake up around half of Budweiser Brewing’s Ebitda, according to Bernstein Research.

Then there’s the fact that growing a brandin Asia’s fragmented market is easier said than done. India, where whiskey is the traditional tipple of choice, and Southeast Asia could have been fertile ground for expansion. One argument for an Asia IPOwas thatBudweiser Brewing would benefit from local tie-ups. WouldtheThai tycoon who ownsVietnam’s top brewer, Sabeco Trading Corp.,or the magnate that controls the Philippines’ San Miguel Corp.really cede control to the Belgian brewer for a piece of the Hong Kong listing? I’m unconvinced.

The fatal flaw, however,may have been AB InBev’s hubris. In deciding against a cornerstone investor tranche, the company eschewed a fixture of Hong Kong’s IPO market. It turns out investors really do like the comfort of big names that pledge to hold stock –even if the practice ties up a lot of liquidity. Had Budweiser’s listing succeeded, it would have been a win for market reform, too.

With such a bubblyvaluation, AB InBev may have thought its investors were wearing beer goggles. Whether the brewer can makeadent in that$103 billion net debtfrom its purchase ofSABMiller looks a lot less certain after a cold shower and pot of black coffee.

(This story has been published from a wire agency feed without modifications to the text.)

First Published: Jul 15, 2019 12:14 IST