The world’s largest brewer Anheuser-Busch InBev would be selling out its Australian business to Japanese firm Asahi. Following the company confirming this agreement, there was a spike in  its shares. The company also added that it was still contemplating taking public its Asian business operations.

There was a 4 per cent spike in the shares in pre-market trading on Friday of the owner of the Budweiser brand. The shares of the company, currently valued at   $151.3 billion, has gone down by 10 per cent so far this year.

Carlton & United Breweries, the Australian business unit of AB InBev would be sold for $11.3 billion in enterprise value to Japan’s Asahi Group Holdings. The money that would come from the deal, which is expected to close by the first quarter of 2020, would be put to use for reduction of debt by the Belgian-based company.

It has been years that the company has been piling up debt in acquisitions that range from acquiring craft beer companies that are eating into its market share to the purchase of its biggest rival ABMiller. The ABMiller deal helped the company to virtually double the number of brands that it is able to offer to customers. However the money expended in the acquisitions were not returned adequately because of a trend among customers of choosing to drink less beer. That pushed the company to alter its strategy to focus and spend more on marketing.

The company had earlier announced its plans for launch of an initial public offering of a monitory stake of its Asian business which was called off last year by the world’s largest brewer. That IPO would have included Carlton & United Breweries. The company had cited market conditions for the call off of the IPO. The plans of the company was to use the proceeds from the IPO to bring down its debt which – majority of which it had inquired form the its acquisition of SABMiller in 2016.

The justification for the launching of the initial public offering (IPO) for a minority stake of Asian business Budweiser APAC, excluding Australia, is still held true by the company, AB InBev said, provided that the price of the IPO is according to the expectations of the company.

The sale of Australian business by AB InBev could have another benefit besides from reducing AB InBev’s debt, said Bernstein analyst Trevor Stirling in a research note published on Friday before the deal was confirmed by the company.

“If there is a chance of selling Australia in a trade sale, ABI could return to the markets to IPO an Asian business that is much more heavily skewed to high-growth China and hence obtain a better valuation (with possibly the benefits of local production of Corona in the cost base),” Stirling wrote.

At the end of 2018, the company had piled up a net debt of $102.5 billion while its net debt to core profit (EBITDA) ratio was at 4.6 times in the same period.

(Adapted from CNBC.com)