Anheuser-Busch InBev (BUD) saw its American Depositary Receipts (ADRs) fall by over 5% on Thursday.
The downturn followed the announcement from Altria (NYSE:MO) that it would reduce its 10% stake in the world’s largest brewer through a secondary offering at a discounted price, triggering market reactions and investor speculation.
Altria to offload 35 million shares in AB InBev
Altria, known primarily for its tobacco products, declared its intention to offload 35 million of its 195 million shares in AB InBev through a diverse sale strategy.
The sale encompasses public offerings of both ADRs and ordinary ABI shares in the United States, coupled with a concurrent private placement of ordinary shares within the European Economic Area and the U.K.
The offering extends to various countries outside the U.S., marking a global scale back in its investment. Altria also provides an option for underwriters to acquire an extra 5.25 million ABI shares, further diluting its stake.
The pricing details revealed a strategy to attract investors, setting the share price at EUR56.17 ($61.26) for ordinary shares and $61.50 per ADR.
This is roughly 5% discount from Wednesday’s closing price of $64.55 in the U.S., indicating Altria’s intention to expedite the sale.
AB InBev has responded by announcing plans to repurchase 3.34 million of its ordinary shares at an investment of $200 million, signaling confidence in its valuation.
More liquid assets for Altria
This transaction is poised to enrich Altria with approximately $2.2 billion in liquid assets.
Altria’s leadership, including CEO Billy Gifford, has expressed that the proceeds will be strategically reinvested into repurchasing its own shares.
Gifford emphasizes the move as an “opportunistic transaction,” capturing a fraction of the substantial returns from their longstanding investment in AB InBev.
Why the move?
The backdrop to this development includes a tumultuous year for AB InBev, particularly concerning its Bud Light brand.
A boycott sparked by the brand’s collaboration with transgender influencer Dylan Mulvaney led to a sharp decline in Bud Light’s popularity, eventually resulting in the loss of its title as the best-selling U.S. beer to Constellation Brands’ Modelo Especial.
Despite this setback, AB InBev reported a 7.8% increase in overall revenue for 2023, underlining the company’s resilience and diversified portfolio strength.