Coca-Cola Said to Explore Offer for F&N Beverage Division

Coca-Cola Said to Be Exploring Offer for F&N Beverage Unit
F&N’s soft-drinks unit includes bottled water, juice drinks, sports drinks, mixers and iced teas, according to its website. Photographer: Munshi Ahmed/Bloomberg

Coca-Cola Co., the world’s largest soft-drinks maker, is exploring a bid for the beverage business of Singapore’s Fraser and Neave Ltd., according to several people with knowledge of the matter.

A bid for the F&N business held under F&N Foods Pte. and Kuala Lumpur-listed Fraser & Neave Holdings Bhd. may pit Coca-Cola against Japan’s Kirin Holdings Co., which is also considering making an offer.

The operations would give Coca-Cola Chief Executive Officer Muhtar Kent the biggest share of soft-drink sales in Malaysia and Singapore, according to Euromonitor International data. The unit, including F&N’s dairy and soft-drinks businesses, may be worth as much as $3 billion, said two of the people, who asked not to be named as the process is private.

“It’s a very dominant player in Malaysia,” said Lim Jit Soon, Singapore-based analyst at Nomura Holdings Inc. “They have a very strong brand in 100Plus, which is recognized around the region,” Lim said, referring to F&N’s sports drink brand.

F&N also owns a real estate business with shopping centers, serviced apartments and industrial property. Real estate accounted for S$2.1 billion in sales last year, 34 percent of the total, data compiled by Bloomberg show. Dairy business sales were S$1.1 billion in 2011, while the soft drinks unit had S$759 million of revenue, the data show.

Coca-Cola hasn’t made a decision and is waiting to see what other suitors do, said another person.

Trading Halted

F&N today requested a halt in trading of its shares pending an announcement. Jennifer Yu, a spokeswoman for F&N, declined to comment on Coca-Cola’s interest or the reasons for the trading halt. Kent Landers, a spokesman for Coca-Cola, said he couldn’t comment on market speculation, and Kirin spokeswoman Nahoko Abe also declined to comment.

Coca-Cola and Kirin are considering bids for F&N’s food and drinks business after Heineken, the world’s third-biggest brewer, last month offered as much as S$7.5 billion ($6 billion) to takeover a brewer that is jointly run by the Dutch company and F&N. F&N owns 40 percent of Asia Pacific Breweries Ltd., while Heineken owns 42 percent. APB, which brews Tiger beer and Heineken, was also halted today in Singapore.

“If you agree to sell Asia Pacific Breweries, it would seem perfectly natural to sell other parts of the businesses too,” said Jonathan Foster, Singapore-based director of Global Special Situations at Religare Capital Markets Ltd. “There is a bigger game other than APB being played out here.”

ThaiBev’s Interest

The Dutch brewer’s July 20 bid came two days after Thai Beverage Pcl, the brewer of Chang Thai Beer, struck a deal to buy a 22 percent stake in F&N. At the same time, a company affiliated with ThaiBev’s billionaire owner Charoen Sirivadhanabhakdi purchased almost 9 percent of APB.

Thai Beverage said yesterday it’s seeking to increase its stake in F&N. The company said July 31 it no longer needs to hold a meeting with shareholders on its investment in F&N after receiving a waiver from the Singapore Exchange, speeding up the transaction. Thai Beverage said it asked for the waiver after the Heineken bid for APB so that its views would be “taken into account” on the offer.

“Thai Beverage has no influence on its decision yet because we don’t have a large stake and no seat on the board yet,” Vichate Tantiwanich, senior vice president at Thai Beverage, said by phone yesterday. The company is “looking for an opportunity to increase our holding in Fraser & Neave” and has “no intention to take over Fraser & Neave,” Vichate said.

Coca-Cola Partner?

For F&N’s beverages business, Coca-Cola is deciding whether to find a partner to take F&N’s line of mixers and tonics, and may drop its plans if it can’t find one, one of the people said. The company had two banks reviewing the F&N assets, the people said. While executives in Asia are interested, a final decision to bid will be made at Coca-Cola’s headquarters in Atlanta, one person said.

The soft-drinks unit also includes bottled water, juice drinks, mixers and iced teas, according to its F&N’s website. F&N also produces pasteurized milk, yogurt, and juices through its dairy business. Coca-Cola is more interested in the soft-drinks operations than dairy, the people said.

The stakes in food and beverage businesses with operations in Malaysia, Vietnam and Thailand have a market value of about S$2.7 billion ($2.2 billion), according to estimates by Nomura’s Lim.

F&N fell 0.4 percent to S$8.15 at the close of trading in the city yesterday, giving it a market value of about S$11.6 billion. Fraser & Neave Holdings, 56 percent owned by F&N, rose 4.6 percent to a record high 20 ringgit, at 3:19 p.m. in Kuala Lumpur today. At that price the company has a market value of 7.2 billion ringgit ($2.3 billion).

Coca Cola gained 0.3 percent to $81.01 in New York trading yesterday, while Kirin, which already owns 15 percent of F&N, ended trading unchanged today at 895 yen.

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