Heineken Beer Scuffle Leaves Thai Tycoon Charoen Richer

Thai Billionaire Bids S$9 Billion for F&N in Hurdle for Heineken
Heineken, which last month offered about $4.4 billion for F&N’s stake in Tiger beer maker Asia Pacific Breweries Ltd., may need to win the Thai billionaire’s backing to buy the brewer. Photographer: Tomohiro Ohsumi/Bloomberg

Thai billionaire Charoen Sirivadhanabhakdi’s planned purchase of Fraser & Neave Ltd. for S$12.7 billion ($10.4 billion) will give him a beverages and real estate company at a 30 percent discount.

F&N’s assets are valued at as much as S$18.2 billion, based on an offer by Heineken NV to buy the company’s stake in Asia Pacific Breweries Ltd. and analysts’ estimates of the valuation of its remaining property, soft drink, dairy and food units.

Thai Beverage Pcl and TCC Assets Ltd., both controlled by Charoen, will back Heineken’s S$5.5 billion bid for F&N’s 40 percent stake in APB at a shareholder meeting next week, the companies said yesterday. The Dutch brewer, which runs APB in a venture, agreed not to make a competing offer for F&N. The deal means Charoen only needs to convince F&N shareholders to accept his offer for the rest of the company.

“This is another shrewd move by the Thais,” said Justin Harper, a Singapore-based market strategist at IG Markets. “Charoen has already benefited from Heineken’s offer on the table for APB. He’s made money from that and he can now concentrate on the property and soft drinks side.”

Charoen’s foreign foray started when he bought a 22 percent stake in F&N for S$2.78 billion from Oversea-Chinese Banking Corp. and its affiliates in July. He then spent about S$950 million buying a further 8 percent of the company in the open market over two months, based on the average price over that period. That was followed by last week’s S$9 billion bid for the remaining 70 percent of the 129-year-old Singapore conglomerate after the purchases triggered takeover rules in the city-state.

Parts Valuation

Besides the S$5.5 billion Heineken will pay in cash for the APB stake, F&N’s property assets are valued at S$8 billion to S$10 billion, said Jenai Chua, an analyst at Bank Julius Baer & Co. in Singapore. F&N’s food, dairy and soft drinks units have a market value of about S$2.7 billion, Lim Jit Soon, a Singapore-based analyst at Nomura Holdings Inc., said last month.

“When you strip out APB, he’s buying the property assets at at least a 30 percent discount, so he’s not paying a high price for F&N,” said Jonathan Foster, a Singapore-based director of Global Special Situations at Religare Capital Markets. “We need to wait and see if F&N recommends that and whether there are other players out there who see that the price to get hold of those assets is too cheap and they’d be willing to pay a premium for that.”

Thai Record

TCC, controlled by 68-year-old Charoen, made the S$9 billion bid on Sept. 13, offering S$8.88 a share for F&N. It’s the largest announced by a Thai company in at least 10 years, according to data compiled by Bloomberg. The offer came before a Sept. 28 meeting where F&N shareholders will vote on the Dutch brewer’s proposal to buy the APB shares it doesn’t already own.

“Charoen’s style isn’t to rush in to buy a stake to scare shareholders,” ThaiBev Chief Executive Officer Thapana Sirivadhanabhakdi said of his father at a media briefing in Bangkok on Sept. 9. “The company has studied F&N’s business for many years.”

F&N’s real estate business has boosted sales 33 percent since 2007 and the soft-drink unit’s revenue has increased 64 percent, according to data compiled by Bloomberg. Its brewing business rose 60 percent. Charoen’s unlisted TCC Group has a real estate arm and ThaiBev sells non-alcoholic drinks in addition to beer and spirits.

Charoen’s plans for the remaining business remain unclear, said Julius Baer’s Chua.

“Maybe he wants to keep the property assets because his empire spans a whole range of business activities from drinks to property to finance,” she said. “At this point really we don’t know what he’s thinking.”

Final Offer

F&N recommended that holders accept Heineken’s increased S$53-per-share bid for the 40 percent stake in APB in August. Heineken, the world’s most acquisitive brewer in the past 12 months, had said it would be its final offer. Heineken had originally been spurred to bid for control of APB, which it holds at least 42 percent of, after a company controlled by Charoen’s son-in-law bought shares in APB.

“It is the deal of the decade,” ThaiBev’s Thapana said. “It provides an opportunity for us to expand businesses in Asia. We want to be a leader in the beverage business.”

The Thai group will also make about S$178 million selling a separate stake of 8.6 percent in APB to Heineken, which it bought in July from OCBC and related parties for S$45 a share.

Stock Gains

ThaiBev jumped as much as 22 percent to 42 Singapore cents yesterday, the highest level since its May 2006 initial public offering in Singapore, before closing at 39 cents. The stock fell 1.3 percent as of 3:06 p.m. today. Heineken’s share price rose 6.4 percent to 45.55 euros in Amsterdam yesterday, the biggest gain in more than three years. It fell 0.1 percent as of 9:07 a.m. today.

Since OCBC announced on July 16 it was in talks to sell its shareholdings in F&N and APB, F&N’s stock has risen 12 percent and APB shares have surged 53 percent as of yesterday. F&N’s shares fell 1 percent to close at S$8.88 yesterday, and are unchanged today. APB’s shares slipped 0.2 percent in Singapore yesterday, and fell 0.1 percent to S$52.94 at 2:48 p.m.

Kirin, Japan’s largest brewer by market value, bought 14.7 percent of F&N two years ago for S$1.34 billion, or S$6.50 a share. Kirin closed 1.8 percent higher in Tokyo yesterday and rose 0.2 percent to close at 1,031 yen today. The company had considered making a bid for F&N’s food and soft-drinks unit, people with knowledge of the matter said in August.

“Investors are telling Kirin not to spend money since it has a huge interest-bearing debt,” said Masashi Mori, a Tokyo-based analyst at Deutsche Bank AG. “They are thinking they don’t care if Kirin retreats from Southeast Asia so long as it won’t join the takeover war. Their Southeast Asia profit contribution is small.”

Yuko Kusano, a spokeswoman for Kirin, declined to comment.

Cash Distribution

F&N said last month it plans to distribute to shareholders about S$4 billion of the proceeds from the APB stake sale through a capital reduction. The proposal requires the approval of 75 percent of F&N shareholders to proceed.

“He may decide that he’ll rather retain that capital within F&N and then he’ll have more flexibility to do what he chooses.” Religare’s Foster said. “It’s a decision they’ll make depending on what they want to do with the assets.”

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.

“So far he seems to be controlling all the action,” Julius Baer’s Chua said. “He doesn’t seem to be reacting. He seems more proactive.”

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