F&N Rises to Record After OUE Group Bid Escalates Bidding

Fraser & Neave Ltd. jumped in Singapore trading after a S$13.1 billion ($10.7 billion) offer from a group led by Overseas Union Enterprise Ltd. (OUE) escalated the bidding war for the 129-year-old property and beverages conglomerate.

F&N shares gained 1.6 percent to S$9.28 today, above the S$9.08 a share offered by the OUE group. The OUE offer trumped a S$8.88 per share bid from Charoen Sirivadhanabhakdi, Thailand’s richest man.

“I’d expect a better offer from Charoen,” said Justin Harper, a strategist at IG Markets in Singapore. “If OUE came in with S$9.50 a share or somewhere near S$10 a share, it might have warded Charoen out of the game. Charoen still has room to maneuver to increase his bid above OUE at the moment.”

Charoen has sought control of F&N since July when he agreed to buy a stake in the drinks and property company, touching off a race to buy its assets. OUE has enlisted Kirin Holdings Co. (2503), Japan’s largest drinks maker and F&N’s second-largest shareholder, in its bid. OUE would get the company’s property business and Kirin would take the food and beverage unit.

“This is the first salvo from OUE, just to test how the other party will respond,” said Lim Jit Soon, Singapore-based analyst at Nomura Holdings Inc. “I expect like any other takeovers, this will lead to offers and counter offers.”

Heineken NV (HEIA) won control of F&N’s beer unit in a deal that closed yesterday. The OUE offer is being made by a unit of Arbon Holdings Ltd., a company incorporated in the Cayman Islands and 50 percent-owned by OUE.

The remaining 50 percent of Arbon is held by certain investment funds and accounts managed by Farallon Capital Management LLC and Noonday Global Management Ltd., alongside other investors.

Kirin Agreement

Kirin, which has a 14.8 percent stake in F&N, has agreed to tender its shares and won’t accept any competing bid, OUE said. The Japanese company is “aware of the announcement,” spokesman Kan Yamamoto said, declining to comment further.

The Japanese brewer, Asia’s biggest beverage maker, will offer S$2.7 billion, for F&N’s food and beverage business if the consortium wins enough support to complete its bid, according to OUE’s statement. Kirin’s stock dropped 2.2 percent to 969 yen in Tokyo trading today.

“Investors are now worried,” Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo, said by telephone today, referring to Kirin’s role. “They’re concerned whether it will turn out to be expensive shopping without rewards.”

Break-up Fee

F&N said it had committed to pay the OUE consortium a break-up fee of as much as S$50 million if a competing offer is successful. F&N said it agreed to the fee to “create a competitive bid situation, thereby maximizing value for shareholders.” The fee shouldn’t be seen as a recommendation by the board, it said.

“The idea of the break-up fee is to entice an interested buyer to step in,” said Professor Ang Ser Keng, senior lecturer of finance at the Singapore Management University. “By announcing this fee, it implicitly signals that F&N has a preferred bidder.”

Charoen has failed to win support from F&N’s board for his existing bid. An independent adviser has found Charoen’s offer “not compelling, though fair,” F&N’s board has said in a letter to shareholders. Charoen’s bid of S$8.88 a share is at the low end of the adviser’s estimates that value the company at S$8.30 to S$11.22 a share, the board said. F&N directors who hold shares don’t intend to accept the billionaire’s offer, the board said.

F&N today reported net income of S$835.6 million for the year ended September.

Two Tycoons

Charoen’s unlisted business, TCC Group, has a real estate unit. His Thai Beverage (THBEV) Pcl, which sells the Chang brand of beer, gets almost all its revenue from its home market.

“We just heard about OUE’s bid late last night,” Vichate Tantiwanich, a spokesman for Thai Beverage, said. “We have no comment at the current time.”

Charoen’s net worth as of Nov. 15 was $8.6 billion, according to data compiled and calculated through the Bloomberg Billionaires Index.

OUE Executive Chairman Stephen Riady is a son of Mochtar Riady, who controls Indonesia’s Lippo Group that has businesses ranging from real estate, financial services to food across Asia. The bid would be the biggest ever acquisition of a Singapore-based company, according to data compiled by Bloomberg.

OUE, which gets about 65 percent of its revenue from hotel operations, is planning at least one investment a year in Singapore to boost property holdings that include office towers, luxury apartments and malls, Stephen Riady said in an interview in August.

Winning F&N’s real-estate business would make OUE the third-largest listed developer by revenue in Singapore, where it is currently 10th, according to data compiled by Bloomberg.

Credit Suisse, Bank of America Merrill Lynch and CIMB Bank Bhd. are acting as financial advisers to the OUE group.

To contact the reporters on this story: 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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