Heineken Sees Asian Importance Rising After Buying Tiger

Heineken NV, (HEIA) the brewer that got approval to buy control of its Asian business for S$5.6 billion ($4.6 billion) today, said the region will represent a larger chunk of profit as more consumers drink its beer.

Asia was “always the weakest in our financials” because the Amsterdam-based brewer didn’t fully control Tiger beer maker Asia Pacific Breweries Ltd. (APB), Chief Executive Officer Jean- Francois Van Boxmeer said on a conference call. Now it’s got the go-ahead to buy Fraser & Neave (FNH) Ltd.’s stake in APB, Heineken expects the region to represent about 15 percent of profit “which will obviously further grow,” he said.

The purchase will increase the European beermaker’s presence in emerging markets, where it has trailed competitors, and give it control over the company it sells products through in countries from China to Sri Lanka. Van Boxmeer said today that it was a “big and bold” move in a region he expects to become one of the fastest-growing beer markets in the world.

“The move increases Heineken’s growth prospects and ensures its position among the leading brewers,” said Zsuzsa Szilagyi, an analyst at Euromonitor International.

Heineken rose as much as 1.5 percent in Amsterdam trading and climbed 1.3 percent to 46.61 euros as of 12:21 p.m.

The brewer, which has controlled APB in a joint venture with F&N since 1931, was spurred to bid for full control after businesses owned by Thai billionaire Charoen Sirivadhanabhakdi, including competitor Thai Beverage Pcl (THBEV), bought stakes in both APB and F&N. Heineken raised an original S$50-a-share bid to S$53 in August, which was recommended by F&N’s management.

Special Dividend

About 99 percent of Fraser & Neave shareholders voted to sell its 40 percent stake in APB to Heineken at an extraordinary general meeting today. The investors rejected a plan to pay out a special dividend after the purchase, handing a victory to Charoen, 68, who is trying to acquire the remainder of F&N, and who opposed the dividend. He is offering $7.3 billion for the Singapore company, which also makes soft drinks and dairy products and owns real estate. Fraser & Neave Ltd. (FNN) will keep $4.6 billion from the sale of its beer business.

Fraser & Neave shares fell 0.1 percent to S$8.88 in Singapore, matching Charoen’s offer. ThaiBev declined 2.4 percent to 40.5 Singaporean cents.

The approval of the sale to Heineken and Charoen’s success in keeping the proceeds with F&N could pave the way for the billionaire to take control of the conglomerate’s other assets.

Bintang Beer

“Both can win in this situation,” said Justin Harper, market strategist at IG Markets, referring to F&N investors. “The Thais have won the favor of Heineken by avoiding a fight for APB. They could end up as trading partners and expand Heineken across the region and build the profile of APB.”

Heineken’s Van Boxmeer declined to comment on whether the brewer might distribute any of ThaiBev’s brands.

APB has rights to brew Bintang beer in Indonesia, Anchor in China, Southeast Asia and Sri Lanka, and Heineken from China to New Zealand. Heineken’s Van Boxmeer said today that the company will also focus on growing the Tiger beer brand in Asia and through other parts of Heineken’s distribution network.

Heineken has the smallest emerging-markets presence of the world’s big three brewers, according to data compiled by Bloomberg. After APB is consolidated, emerging markets will represent 55 percent of the brewer’s earnings before interest and tax, compared with 50 percent currently.

Short Supply

“The shareholders’ vote is positive for Heineken,” Richard Withagen, an analyst at SNS Securities in Amsterdam, said in a research note. “It can now work towards completion of the deal, the integration of APB into the Heineken group and further develop the business in the future.”

Brewing assets in high-growth economies are in short supply after a decade of consolidation. European brewers including Carlsberg A/S, Anheuser-Busch InBev NV and SABMiller Plc are seeking growth outside the U.S. and western Europe as economic growth stagnates and the debt crisis stints sales.

The APB takeover is still subject to regulatory approval and is expected to close in November 2012, after which Heineken will own a 95.3 percent stake. The company will keep its regional headquarters in Singapore.

Charoen’s agreement to support Heineken’s offer for APB has spurred speculation he would break up F&N, a 129-year-old group.

“After the sale of the brewery business, what’s left are the beverage and property businesses,” said Ng Soo Nam, Singapore-based chief investment officer at Nikko Asset Management, which oversees about $165 billion in assets. “Those are probably interesting assets to the ThaiBev group. This could be part of their geographic diversification.”

Kirin Stake

F&N is open to making acquisitions for the beverage business and it will work with Thai Beverage to create new businesses together, Financial Controller Hui Choon Kit said at a press briefing today. Malaysia is the biggest market for the company’s drink business and it may expand into Myanmar, Indonesia and Vietnam, he said.

Japanese brewer Kirin Holdings Co. (2503), which owns 15 percent of F&N, will sell its stake for about 120 billion yen ($1.55 billion), Nikkei said today. Spokesman Jun Sato said the company wasn’t the source of the report.

Kirin plans to sell its entire stake in F&N, probably to Thai Beverage, Nikkei reported without saying where it obtained the information. Kirin will use the proceeds of about 30 billion yen for acquisitions in emerging markets, Nikkei said.

“It would be good for them as they could use the money to rebuild their Australian and Brazilian businesses,” said Mikihiko Yamato, deputy head of research for JI Asia in Tokyo.

Kirin shares rose 0.5 percent to 1,044 yen in Tokyo.

To contact the reporters on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net; Joyce Koh in Singapore at jkoh38@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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

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