If Charles Li needs a beer to weep into, Budweiser would be the appropriate brew. Brand owner Anheuser-Busch InBev has revived plans to list its Asia-Pacific business on the Hong Kong stock exchange, which he runs. Just the kind of good news he needs following a negative reception for his plan to buy the London Stock Exchange at an enterprise value of £31.6bn.
AB InBev’s renewed enthusiasm for a Hong Kong float proves that multinationals still want to tap the bourse, even after months of protests by civil rights campaigners. Funds raised through listings in Hong Kong dropped 56 per cent in August.
If Mr Li’s tilt at LSE is to succeed, he has to persuade London investors there are big opportunities in east-west collaboration. Cynics fear the bid is instead prompted by HKEX’s need to reduce its exposure to fickle, authoritarian China.
AB InBev’s validation is welcome. What matters more is the ability of HKEX to continue attracting initial public offerings from large Chinese businesses. Mr Li — who has not ruled out going hostile — has to persuade London investors to take HKEX’s unappealing shares. These have fallen 15 per cent in recent months.
Some of HKEX’s key attractions are diminishing. Hong Kong handles three-quarters of total renminbi-denominated international payments. But the use of the currency for international payments is less than 2 per cent, compared with 40 per cent for the US dollar. That may diminish as trade tensions worsen.
To get a hearing, Mr Li may need to subdue his qualms over debt and offer more cash. HKEX would have net debts of about twice combined ebitda, if, improbably, its current approach at £83.6 a share succeeded. Increasing the cash component by £11 to £31 would leave HKEX with a 3.5 times ratio, the same burden LSE plans to shoulder with its popular offer for Refinitiv.
Unfortunately, Chinese state-controlled banks are the lenders most likely to put up the money. That would only stoke hostility to the deal in the UK and US.
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