Thai Beverage Pcl, Thailand’s biggest beer maker, agreed to pay S$2.78 billion ($2.2 billion) for Fraser & Neave Ltd.’s shares held by Oversea-Chinese Banking Corp. and its partners.
The Thai company will buy 313 million Fraser & Neave shares at S$8.88 each, or about 22 percent of Singapore’s biggest beverage maker from OCBC, its unit Great Eastern Holdings Ltd. and Lee Rubber Co., according to an e-mailed statement yesterday. The price is a 12 percent premium to yesterday’s close of S$7.96 in Singapore.
Brewers including Asahi Group Holdings Ltd. and Kirin Holdings Co. have said they’re targeting takeovers in Southeast Asia, where young populations and growing economies are spurring beer sales. Fraser & Neave is one of two key investors in Asia Pacific Breweries Ltd. in Singapore, a stake DMG & Partners Securities said is its “crown jewel.”
“APB is by far the largest brewery player in the Asia-Pacific region, with an extensive presence across 14 countries,” Goh Han Peng, an analyst at DMG, said in a report today. “Given the small public float in APB, of less than 11 percent, brewery players that are keen to take a stake in APB has been doing so indirectly by investing in F&N.”
OCBC, Singapore’s second-biggest bank, and Great Eastern hold 18.2 percent of Fraser & Neave and 7.92 percent of Asia Pacific Breweries, according to their filing. Lee Rubber, a closely held company, owns 3 percent of OCBC, according to the lender’s website.
Thai Beverage is controlled by Thai billionaire Charoen Sirivadhanabhakdi’s TCC Group. Charoen also owns companies in industries ranging from insurance to property development. His son-in-law, Chotiphat Bijananda, will buy shares of Asia Pacific Breweries, Thai Beverage said.
“We are waiting to see what happens next, whether the main shareholders will club cozily together or club one another over the head,” said Hugh Young, Singapore-based managing director at Aberdeen Asset Management Asia Ltd., which owns 7 percent of OCBC, less than 1 percent of Fraser & Neave and less than 0.1 percent of Asia Pacific Breweries. “For OCBC, it did absolutely right with the deal, while time will tell for Thai Beverage.”
Fraser & Neave, Singapore’s biggest beverage maker, climbed to a record high on July 17 after OCBC said it was in talks to sell the shares. The stock slumped 4.5 percent to S$7.60 at the close in Singapore, the largest drop in more than seven months.
“Shareholders are disappointed that the offer was made to OCBC and not to the rest of the shareholders,” said Lim Jit Soon, head of Southeast Asia research at Nomura Securities in Singapore. “People have been buying the stock in anticipation of a general offer.”
Asia Pacific Breweries surged 10 percent to S$42, a record. OCBC and Great Eastern advanced more than 1.3 percent, and Thai Beverage were unchanged in Singapore trading.
Moody’s Investors Service and Standard & Poor’s said today Thai Beverage’s stock purchase could hurt its credit profile as it may elevate its debt level. Annalisa Di Chiara, Moody’s senior analyst, said the deal represented a “material change” in Thai Beverage’s financial risk and acquisition appetite, while Xavier Jean, an S&P analyst, said the “commercial synergies of the acquisition could take time to materialize, particularly given Thai Bev’s minority stake.”
OCBC said in its statement it will sell S$389.3 million of Asia Pacific Breweries shares to Kindest Place Groups Ltd., a company controlled by Bijananda. Great Eastern will divest its stake in the Singapore beermaker for S$530.9 million, according to the statement. The offer price for both stakes was S$45 a share, or an 18 percent premium to yesterday’s close of S$38.10.
The bank said in a statement the sale was in line with its strategy of focusing on its financial business.
Kirin, Japan’s largest brewer by market value, bought 14.7 percent of Fraser & Neave two years ago for S$1.34 billion, paying S$6.50 per share.
Heineken NV, the world’s third-largest brewer, owns a 42 percent stake in Asia Pacific Breweries, the maker of Tiger beer. Fraser & Neave owns 40 percent.
Heineken said in a July 17 statement that it has noted the announcement on Fraser & Neave and Asia Pacific Breweries and is “actively considering” its options. The company didn’t say whether it plans to make an offer for Asia Pacific Breweries.
“We are aware of the announcement,” Kan Yamamoto, Kirin’s spokesman, said by phone. “We won’t change our stance to focus on our integrated beverage’s group strategy in Southeast Asia.”
Charoen was born and raised in Bangkok’s Chinatown district after his parents moved from Shantau in China, according to TCC’s website.
He started a trading business that supplied distilleries, and became a distiller after being awarded concessions to produce liquor in Thailand. Charoen bid for the rights to operate distilleries under the Sang Som Group during the liberalization of the nation’s liquor industry, and later expanded into beer, alcohol, sugar, and packaging businesses, according to the company.
Thai Beverage sold shares in Singapore in 2006 after anti-alcohol protesters blocked an offering in its home market. The company offered to buy Serm Suk Pcl, the bottler of PepsiCo Inc. beverages in the Southeast Asian nation, for as much as 15.4 billion baht ($488 million) last September, saying the purchase will allow it to expand its “non-alcoholic product portfolio.”
“The proposed investment immediately diversifies the company geographically and is highly complementary to the company’s existing single-market focus,” Thai Beverage said. The investment “will enable exposure to high-growth Southeast Asian markets with attractive demographics and consumer spending trends.”
Morgan Stanley and HSBC Holdings Plc advised the buyer, according to four people with knowledge of the matter.