Asahi: Secondary Offering Caused by Unwinding of Crossholding Is Short-Term Pain for Long-Run Gain

Asahi Group Holdings announced after the market closed on Nov. 16 that it will conduct a secondary offering, equivalent to 6.6% of its outstanding shares, overseas. The shares to be sold are owned by eight financial institutions, which have been holding Asahi’s shares for a cross-shareholding, as well as the pension fund of Mizuho Bank’s employees. While the secondary offering is likely to weigh on Asahi’s near-term share price, we believe unwinding the cross-shareholding is positive for Asahi’s corporate governance and shareholder structure over the long run. The timing of the unwinding also indicates management’s confidence in the firm’s growth prospects and future share performance. We reiterate our investment thesis that Asahi will be the key beneficiary of Japan’s tax reforms, which will prompt consumers to trade up to beers from cheaper beer-like alternatives. The shares are trading at a 12% discount to our fair value estimate of JPY 6,600.