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Heineken Said to Mull APB Bid Hike to About S$53 a Share

Heineken NV (HEIA), the world’s third- largest brewer, is in talks with Fraser & Neave Ltd. about raising its offer for the rest of Asia Pacific Breweries Ltd. (APB), said three people with knowledge of the matter.

Heineken is considering boosting its offer to about S$53 ($42) a share from S$50 per share for APB, said the people, who asked not to be identified because the talks are private. An announcement may come as early as today, three people said. A condition for a higher bid may include guarantees over deal completion. Kindest Place Groups, owned by the son-in-law of Thai billionaire Charoen Sirivadhanabhakdi, has offered to buy 7.3 percent of APB from F&N for S$55 per share.

F&N owns 40 percent of APB, while Amsterdam-based Heineken holds a 42 percent stake. The Dutch brewer has sought full control of the Tiger beer maker as it attempts to protect its hold over a key emerging-market business and as brewing assets in high-growth economies are in short supply after a decade of consolidation in the industry.

If $S53 is Heineken’s final offer, “they are basically trying to seal the deal with this,” said Trevor Sterling, analyst at Sanford C. Bernstein.

Asian Expansion

Singapore-based APB and F&N were both suspended from trading there today. Charoen’s Thai Beverage Pcl (THBEV) is unchanged at 33.5 Singapore cents as of 3:57 p.m. in the city-state, after rising as much as 1.5 percent. Heineken shares were down 1.23 percent to 43.25 euros at 12:44 a.m. in Amsterdam.

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. Kindest Place also agreed to buy about a 9 percent stake in APB at that time. 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.

Heineken spokesman John Clarke referred to a previous company statement that discussions with F&N were continuing. Reuters reported the talks earlier today, citing unidentified people.

The Thai company may have put in the higher bid to get Heineken to raise its offer, Lee Syn Yi, a Singapore-based equity analyst at CIMB-GK Pte. Charoen’s family is already benefiting from a rise in APB’s stock. The value of Kindest Place’s 8.6 percent stake in APB has already risen by S$124 million based on the purchase price of S$45 a share.

Overseas Expansion

Thai Bev said last month that the F&N stake will allow it to expand its “non-alcoholic product portfolio” and to diversify geographically. The Thai brewer could also benefit from any dividends that F&N pays out from sale its stake in APB.

Deutsche Bank analyst Gregory Lui estimated in a July note that a sale of APB at S$50 a share could provide F&N and its shareholders “significant” one-time gains and special dividends of about S$2.71 a share.

Born and raised in Bangkok’s Chinatown district, Charoen started a trading business that supplied distilleries and became a distiller after being awarded concessions to produce liquor in Thailand.

‘Winner Both Ways’

“Thai Bev is a winner both ways,” said Jenai Chua, a Singapore-based analyst at Bank Julius Baer in an interview earlier this month. “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 dividend. If it doesn’t go through, they get a chunk of a very lucrative and well-established beer business.”

Stirling said that Kindest Place was probably seeking to benefit financially from any increase in Heineken’s offer, and may try to influence APB strategy with a possible deal to cooperate in Thailand. “They probably have flexible objectives,” he said.

Thai Bev will focus on “long-term business” with F&N, Vichate Tantiwanich, a senior vice president at Thai Bev said via e-mail today.

Faster-Growing Regions

Heineken, which accounts for about 8.8 percent of the global beer market, is seeking to expand in faster-growing regions such as Southeast Asia amid weak consumer spending in the developed markets of Europe and the U.S. The company has the smallest presence in emerging markets among the world’s top three brewers, according to data compiled by Bloomberg. About 37 percent of operating income came from western Europe last year.

A sale of its stake in APB’s brewing business, could also draw acquisition interest in other parts of F&N, which also has soft drink and real estate operations. Japan’s Kirin Holdings Co. (2503) has said it is interested in F&N’s soft drink and food operations.

The purchases by Thai Beverage and Kindest were completed this week. Thai Beverage has since raised its stake in F&N to 26.4 percent.

To contact the reporters on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net; Jacqueline Simmons in Paris at jackiem@bloomberg.net; Joyce Koh in Singapore at jkoh38@bloomberg.net

To contact the editor responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net

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