Wednesday, July 25, 2012

Takeover war for Tiger brewer flows into F&N boardroom

Fraser and Neave Ltd's (F&N) board is set to decide the fate of its crown jewel by this Friday as Dutch and Thai suitors battle to take control of the brewer of Tiger Beer, one of Singapore's most iconic brands.

Heineken's $6 billion bid for Asia Pacific Breweries Ltd (APB) could also lead to the break-up of F&N's complex structure of drinks, property and publishing units.

"I suspect it's going to be a big unlocking of value. A general offer has been done for APB so the next natural thing is for F&N itself," said Christopher Wong, an investment manager at Aberdeen Asset Management Asia, which owns shares in F&N.

In the midst of Singapore's biggest takeover battle, Nomura has estimated the worth of F&N's property business at around $5.8 billion and its publishing and food and beverage arms, excluding APB's stake, at about S$2.5 billion.

The food and beverage business includes several brands of beer, fruit juices, dairy products and the popular soft drink 100PLUS.

F&N - whose chairman Lee Hsien Yang is the younger son of Singapore's first prime minister and elder statesman Lee Kuan Yew - gave details of its regional holdings and finances in a presentation for a non-deal roadshow this summer.

Founded in 1883 by John Fraser and David Chalmers Neave to make soft drinks, F&N launched Tiger Beer nearly half a century later in a joint venture with Heineken that later became APB.

Heineken is now having to break off that long relationship with F&N to defend its interests in APB from advances by Charoen Sirivadhanabhakdi. The billionaire founder of Thai Beverage PCL is seeking to expand his own beer business in Asia.

Companies linked to Charoen threw down the gauntlet last week by offering $3 billion for stakes in F&N and APB held by Oversea-Chinese Banking Corp and affiliated groups.

Singapore's OCBC had owned parts of F&N and APB since 1948.

Heineken, whose joint venture with F&N has a 65 per cent controlling stake in APB, countered the Thai bid with its general offer for the whole company.

F&N has said its board will make a decision about the Dutch giant's offer by this Friday - putting pressure on Charoen and Japan's Kirin Holdings to act fast. Kirin, which owns about 15 per cent of F&N, has hired Deutsche Bank as an advisor.


Investor interest is clearly high.

More than 43 million F&N shares, about 3 per cent of its total outstanding stock, were traded at S$8.08 each in block deals this week.

Some market players see "a price war going on," one analyst in Singapore said.

APB operates 24 breweries in 14 countries, including Singapore, Malaysia, Indonesia, Vietnam, Thailand and Cambodia.

"It's not just well known in the region, it's got some attraction outside Asian markets," Aberdeen's Wong said.

If F&N accepts Heineken's offer, the Singapore conglomerate will reap cash proceeds of about S$5.2 billion, part of which could be paid as a special dividend, but lose an important contributor to its earnings, Nomura said in a report.

Without APB, Kirin and Thai Beverage may try to have F&N split up so the beverage and property businesses can be valued separately and control of the assets settled, it said.

If F&N rebuffs the Dutch offer, Heineken's options include boosting its bid, building up a stake in F&N to gain control of APB or choosing to work with Thai Beverage, analysts said.

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