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Heineken May Need to Raise APB Bid Amid Thai Pressure

Heineken NV (HEIA) may need to raise its bid for the rest of Asia Pacific Breweries Ltd. (APB) or risk having an agitator as a minority investor in the Tiger beer maker after a company linked to a Thai billionaire offered a higher price.

Kindest Place Groups, owned by Charoen Sirivadhanabhakdi’s son-in-law, yesterday offered to buy a 7.3 percent stake in the Singapore-based company from Fraser & Neave Ltd. for S$55 a share. That topped the S$50 a share that Heineken, which already owns 42 percent of APB, offered F&N for a 40 percent holding, a proposal that was recommended by F&N’s board.

Heineken fell 2.4 percent in Amsterdam trading yesterday on concern it may have to pay more to gain full control of what it deems to be a key emerging-market asset. The Dutch company, the world’s third-largest brewer, is seeking to expand in faster- growing regions such as south-east Asia amid weak consumer spending in the developed markets of Europe and the U.S.

“It’s likely Heineken will have to increase its bid,” said Olivier Nicolai, an analyst at UBS AG in London. F&N (FNN)’s shareholders may reject Heineken’s offer at an extraordinary meeting due to be held in six to eight weeks’ time, and “might realize someone else is prepared to pay them a bit more.”

Spurred Into Action

Asia Pacific Breweries surged as much as 6.9 percent to S$52.20 today before trading at S$51.85 as of 2:52 p.m. local time. F&N rose 2.7 percent to S$8.50. Heineken shares gained 0.4 percent to 44.55 euros at 9:01 a.m. in Amsterdam.

Kindest Place is offering to buy the 7.3 percent stake in APB that is held by Singapore-based F&N outside of a joint venture through which F&N and Heineken own about 65 percent of the Tiger beer maker. Heineken, whose links to APB date back to 1931, owns about 9.5 percent of the company directly.

F&N shares are rising because “the market, whether rightly or wrongly, may anticipate a higher offer for the APB stake,” said Goh Han Peng, an analyst at DMG & Partners Securities.

Heineken was spurred to make an offer for APB last month after Charoen’s Thai Beverage Pcl bid for a 22 percent stake in F&N, which would give it a seat on F&N’s board. Kindest Place also offered to buy about a 9 percent stake in APB. The moves would potentially have infringed on the Dutch company’s influence over its brewing operations with APB, which has rights to brew Bintang beer in Indonesia, Anchor in China, Southeast Asia and Sri Lanka, and Heineken from China to New Zealand.

Thai Bev (THBEV) shares were unchanged at 33 Singapore cents today.

‘Compelling Value’

Heineken said Kindest Place’s bid for the smaller stake is “not comparable” to its offer. Heineken’s bid for the APB shares it doesn’t own, including a mandatory tender offer to shareholders excluding F&N, would total as much as S$7.7 billion, whereas Kindest Place would pay about S$1 billion.

“Heineken continues to believe that the Heineken offer represents compelling value for F&N’s and APB’s shareholders,” it said. “Heineken continues its discussions with F&N.”

Vichate Tantiwanich, a senior vice president at Thai Bev, said by phone that he couldn’t comment on Kindest Place’s bid.

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 its operating income came from western Europe last year, the data show.

Total beer volume in Asia and Latin America is set to increase at a compound annual rate of 6 percent from 2012 to 2016, investment bank Nomura estimates, compared with a 1 percent decline in Europe and no growth in North America.

‘Very Lucrative Business’

“Heineken must now raise its bid, or else risk its Asian strategy being in tatters,” Eddy Hargreaves, an analyst at Canaccord Genuity Ltd., said in an e-mail.

The Dutch brewer also could work alongside Thai Bev and Kindest Place, or the Thai companies may bid for full control of F&N to gain control of its APB stake, Nicolai at UBS said.

“The Heineken brand is 30 percent of APB’s volume and is a key growth and profit driver, so Thai Bev/Kindest probably want to work with Heineken” in Asia, he wrote in a note.

Sirivadhanabhakdi is set to benefit whatever happens. Born and raised in Bangkok’s Chinatown district, he started a trading business that supplied distilleries and became a distiller after being awarded concessions to produce liquor in Thailand. He bid for the rights to operate distilleries under the Sang Som Group during a liberalization of the nation’s liquor industry, before expanding into beer, alcohol, sugar, and packaging businesses.

“Thai Bev is a winner both ways,” Jenai Chua, a Singapore-based analyst at Bank Julius Baer, which manages $281 billion in assets, said ahead of yesterday’s announcement. “If the APB sale goes through, they can still make a pretty big disposal gain should F&N decide to distribute proceeds of the sale to shareholders as a dividend. If it doesn’t go through, they get a chunk of a very lucrative beer business.”

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

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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