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Thai Billionaire Faces Hurdle in Fraser & Neave Bid

The offer complicates a S$9 billion takeover bid Thai billionaire Charoen Sirivadhanabhakdi made last month to gain control of the conglomerate. Fraser & Neave is set to complete the sale  of its brewing business to Heineken for S$5.6 billion later this year. Photographer: Munshi Ahmed/Bloomberg
The offer complicates a S$9 billion takeover bid Thai billionaire Charoen Sirivadhanabhakdi made last month to gain control of the conglomerate. Fraser & Neave is set to complete the sale of its brewing business to Heineken for S$5.6 billion later this year. Photographer: Munshi Ahmed/Bloomberg

Thai billionaire Charoen Sirivadhanabhakdi’s $7.3 billion bid to buy Fraser & Neave Ltd. is under threat after the Singapore conglomerate received a competing offer for one of its businesses.

Singapore-based Overseas Union Enterprise Ltd. made a $1.1 billion bid for the company’s serviced apartment business, Chairman Stephen Riady said in an interview yesterday. An independent adviser has found Charoen’s offer “not compelling, though fair,” F&N’s board said in a letter to shareholders.

The outside bid for an F&N business is a setback for Charoen as he seeks to expand his Thai real-estate and beverage businesses in Asia. The billionaire agreed to buy a stake in F&N in July, setting off a fight for the 129-year-old conglomerate and assets spanning from soft-drinks to property.

“It creates more awareness of the undervaluation of the property and could make it harder for the Thais to gain control,” said Goh Han Peng, analyst at DMG & Partners Research Pte in Singapore, referring to the bid for the serviced apartment unit. “The Thais would want majority control of more than 50 percent of F&N so that they can influence the future of the conglomerate.”

Charoen’s offer 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 yesterday. F&N directors who hold shares currently do not intend to accept the billionaire’s offer, the board said.

Better Return

F&N shareholders last month agreed to sell its brewing business to Heineken NV, while Charoen’s TCC Assets Ltd. on Sept. 13 made a S$9 billion ($7.3 billion) bid for the 70 percent of the Singapore company he doesn’t already control.

The bid for the apartment assets “shows F&N could yield a better return for shareholders and sell the assets slowly and bit by bit by going into different negotiations with different interested parties,” said Jason Hughes, head of premium client management at IG Markets in Singapore.

Charoen may have to counter with a higher bid for F&N because the S$1.4 billion offer for the serviced residence business “is a premium to the value at which F&N is covering this property in their books,” according to Jonathan Foster, Singapore-based director of Global Special Situations at Religare Capital Markets.

“This gives the board some leverage now to point out that TCC is fundamentally mis-valuing the rest of the F&N assets,” he said. “It will be sensible for TCC to raise the offer.”

F&N serviced apartments in Singapore, China, Australia had a book value of at least S$776 million as of June 30, based on Bloomberg calculations from a Oct. 8 company statement.

Serviced Apartments

Jennifer Yu, a spokeswoman for F&N, declined to comment. Vichate Tantiwanich, Thai Beverage’s spokesman, didn’t answer a call or respond to an e-mail seeking comment.

The hospitality business is part of F&N’s property unit, which gave the conglomerate about 30 percent of its 2011 revenue of S$6.3 billion. F&N got 12 percent of sales from soft drinks last year and 17 percent from dairies, according to data compiled by Bloomberg.

F&N rose 0.6 percent to close at S$8.93 in Singapore yesterday. The stock has been trading above the S$8.88 a share that Charoen offered in September.

F&N shareholders last month agreed to sell the company’s 40 percent stake in Tiger beer maker Asia Pacific Breweries Ltd. for S$5.6 billion to Heineken. That deal is expected to close in November.

Conglomerate Break-Up

The agreement with Heineken spurred speculation that F&N’s remaining businesses could attract other bidders, prompting a break-up of the 129-year-old conglomerate.

Japan’s Kirin Holdings Co. , which has a 15 percent stake in F&N, has said it is interested in its soft-drink and food businesses. Hajime Kawasaki, Kirin’s spokesman, declined to comment.

Overseas Union, a property affiliate of Indonesia-based Lippo Group, in August said it is seeking acquisitions to almost double the assets to S$10 billion in as early as three years.

F&N’s serviced apartment business “has global reach and is a top brand and hospitality is one of our core businesses so this proposal to Fraser & Neave is in line with our strategic growth,” plans, Riady, the chairman of Overseas Union, said yesterday.

F&N said it won’t respond to the offer for the serviced apartments, citing takeover rules and the business’s value within the conglomerate’s property division, according to yesterday’s statement to the Singapore stock exchange.

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

Charoen, 68, was born and raised in Bangkok’s Chinatown district. He bid for the rights to operate distilleries during a liberalization of the nation’s liquor industry, before expanding into beer, alcohol, sugar, and packaging businesses.

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