Heineken Agrees to Buy F&N ABP Stake to Control Asia Brewer

Heineken NV (HEIA), the world’s third- biggest brewer, agreed to buy Fraser & Neave Ltd. (FNN)’s stake in Asia Pacific Breweries Ltd. (APB) for S$5.1 billion ($4.1 billion) to gain control of the maker of Tiger beer.

F&N’s board of directors recommended Heineken NV’s offer of S$50 a share for its 40 percent stake in APB to shareholders, the Amsterdam-based company said in a statement today. Heineken already owns a 42 percent stake and said on July 20 that it would offer as much as S$7.5 billion for the rest.

Heineken is seeking full control of Singapore-based APB as it attempts to protect its hold over a key emerging-market asset. Thai Beverage Pcl (THBEV), controlled by billionaire Charoen Sirivadhanabhakdi, last month bid for a 22 percent stake in F&N. A company owned by his son-in-law also acquired about 8.4 percent of APB. Brewing assets in high-growth economies are in short supply after a decade of consolidation in the industry.

“APB is a great business and it makes complete sense for Heineken to want to bring it fully into the fold,” Trevor Stirling, an analyst at Sanford C. Bernstein in London, wrote today. “We are also delighted that our anxieties about being forced into a bidding war were unfounded and that Heineken did not increase what was in our view already a very fair offer.”

Some analysts had expected Heineken to raise its offer to secure control of APB, with which it’s been involved since 1931 and through which it distributes its brands in southeast Asia. Heineken will make a mandatory general offer at the same price for all of the remaining shares of APB once a final agreement with F&N’s shareholders has been reached, according to the statement.

Shares Gain

Heineken rose 3.4 percent to 45.98 euros in Amsterdam trading. APB’s shares closed on Aug. 1 at S$49.50, before trading was halted yesterday in Singapore.

The offer price of S$50 a share is 19 percent above APB’s closing price of S$42 on the day before Heineken announced its plan, and also more than the S$45 a share that a company owned by Sirivadhanabhakdi’s son-in-law, Chotiphat Bijananda, agreed to buy its stake from Oversea-Chinese Banking Corp. (OCBC) The average premium paid in 45 takeovers of beermakers announced in the last two years is 25 percent.

The purchase will be the latest step in the consolidation of the industry as brewers buy each other or seek full control of joint ventures. Anheuser-Busch InBev NV (ABI), the world’s biggest brewer with an 18 percent share of the market, bid $20.1 billion for the remaining 50 percent of Grupo Modelo SAB in June, tightening its hold on the Mexican market.

Industry Consolidation

The APB deal will be Heineken’s largest after offering $7.4 billion in 2010 for the beer operations of Coca-Cola bottler Fomento Economico Mexicano SAB (FEMSAUB), or Femsa.

Heineken, which accounts for about 8.8 percent of the global beer market, has the smallest emerging-markets presence of the world’s big three brewers, according to data compiled by Bloomberg. About 37 percent of the company’s operating income last year came from western Europe, where intense competition, economic turmoil and already-high per-capita beer consumption are holding back sales growth.

Besides the Singaporean Tiger brand, APB has rights to brew Bintang beer in Indonesia, Anchor in China, Southeast Asia and Sri Lanka, and Heineken from China to New Zealand.

The transaction won’t be subject to due diligence, though is conditional on F&N shareholder and regulatory approvals. Rival brewer Kirin Holdings Co. (2503), Japan’s largest beermaker by market value, owns a 15 percent stake in F&N.

Kirin is mulling a bid for F&N’s soft drinks and dairy business, three people familiar said July 26, as is Coca-Cola Co. (KO), the world’s biggest soft-drinks maker, several people with knowledge of the matter said August 2.

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.