A four-month battle for Fraser & Neave Ltd’s S$13.8 billion ($11.2 billion) empire faces a weekend deadline that may force bidders to an unprecedented auction for the property and beverages company.
Thai billionaire Charoen Sirivadhanabhakdi, who in September offered S$8.88 a share for control of the Singapore company, is competing with investors led by Overseas Union Enterprise Ltd., which on Nov. 15 bid S$9.08. The stock closed 0.8 percent higher at S$9.58 yesterday.
Charoen and OUE have been given until Jan. 20 to show they are willing to revise their proposals in which case Singapore’s Securities Industry Council will order an unprecedented auction of F&N. The 130-year-old conglomerate has businesses ranging from soft-drinks to apartment buildings across Southeast Asia.
“It finally forces the hand of the two sides to pay up more,” said Jason Hughes, head of premium client management at IG Markets in Singapore. “Most people do expect there to be further scope to raise the bids since both offers are at the very low end of valuations.”
An auction process kicks off after the weekend if neither company has said its offer is final. If one or the other indicates its proposal is final by Sunday, the deal will be decided through a shareholder vote. Charoen’s companies have a 34 percent stake in F&N, while OUE has the backing of Kirin Holdings Co.’s 15 percent holding.
If either group wishes to raise its offer after Jan. 20, it must submit the bid to the Securities Industry Council. The rival will have time to respond.
At the end of the auction, the Charoen and OUE groups would have made their final offers, the regulator said in a statement this month. “F&N shareholders would then be able to decide which offer to accept or none at all,” the statement said.
The regulator-directed auction is unprecedented, Singapore’s daily Business Times has said.
Charoen agreed to buy a 22 percent stake in F&N in July, setting off a fight for the company’s soft drink and property assets and prompting the sale of its beer unit to Heineken NV.
OUE, a Singapore-based property company, has teamed with Kirin Holdings Co., Japan’s largest drinks maker, in its bid. OUE would get the company’s property business and Kirin would take the food and beverage unit.
“In this particular case, however, there doesn’t seem to be a level playing field, which could actually reduce the efficacy of the auction process,” said Ang Ser-Keng, senior lecturer of finance at the Singapore Management University. “The Thais with their existing shareholding, called a toehold, has an upper hand. As a bidder with a substantial shareholding, you can afford to bid more aggressively given you already own significant number of shares.”
Charoen’s offer values the company at S$12.8 billion, while OUE’s bid is worth S$13.1 billion.
Singapore’s measures last week to curb speculation in its housing market may drive home prices lower for the first time in five years, Mizuho Corporate Bank Ltd. and Barclays Plc said. The government added 5 percentage points to 7 percentage points more in stamp duties on residential purchases and introduced new restrictions on down-payments and loans for some buyers.
“I don’t think the bids will be as aggressive as it could have been given the recent property measures announced by the government,” Hughes said.
Kirin has agreed to tender its 14.8 percent stake in F&N, OUE has said. The Japanese brewer, Asia’s biggest beverage maker will offer S$2.7 billion for F&N’s food and beverage business if OUE wins enough support to complete the takeover.
F&N’s board has said an independent adviser has found both offers “not compelling but fair.” Charoen’s unlisted business, TCC Group, has a real estate unit, while his Thai Beverage Pcl sells the Chang brand of beer. Charoen, 68, is Thailand’s richest man and has a net worth of about $9.5 billion, based on calculations from the Bloomberg Billionaires Index.
The Thai billionaire 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.
OUE Executive Chairman Stephen Riady is a son of Mochtar Riady, who controls Indonesia’s Lippo Group, with businesses ranging from real estate and financial services to food across Asia. If successful, it would be the biggest ever acquisition of a Singapore-based company, according to data compiled by Bloomberg.