Thai Billionaire’s F&N Seeks Deals in Race With Coke, Pepsi

  • F&N will ‘look at’ buying more of Vinamilk if it’s available
  • Singapore-based drinksmaker wary of over-paying for deals

Fraser & Neave Ltd., the drinks-maker controlled by Thailand’s richest man Charoen Sirivadhanabhakdi, is searching for acquisitions to bolster its market share in Southeast Asia after its war chest grew to nearly S$1 billion ($745 million) with sales of beer assets.

A potential target is Vietnam Dairy Products JSC, also known as Vinamilk, according to Lee Meng Tat, F&N’s chief executive officer for non-alcoholic beverages. Vietnam’s largest milk producer is an example of what F&N wants in an acquisition: a company with market presence, well-known brands, and a strong distribution network, he said.

“The ideal situation is of course to acquire,” said Lee, referring to F&N’s efforts to expand in Southeast Asia, where he said the company is a “distant third” to U.S. soft drinks giants PepsiCo Inc. and Coca-Cola Co. “That would give us a much faster way into the market.”

Singapore-based F&N has S$971.8 million of cash and cash equivalents as of end-June, after selling its stake in Myanmar Brewery Ltd. last August, three years after it divested its share of Asia Pacific Breweries. In Southeast Asia, home to nearly 600 million people and among Asia’s fastest growing economies, the company also plans to build its presence from scratch in some markets if acquisition opportunities do not work out.

Vinamilk, Vietnam’s biggest company by market value, gained as much as 1.2 percent in Ho Chi Minh City on Tuesday, heading for a fresh record high. F&N fell as much as 1 percent in Singapore trading.

Vinamilk had surged to a record last week after index compiler MSCI Inc. said it would add the stock to its gauge of frontier markets, extending gains after the government scrapped the foreign ownership limits for the company. The shares have jumped 32 percent so far this year, compared with the local benchmark index’s 14 percent gain.

If more shares in Vinamilk become “available and it makes financial sense, we will always look at it,” said Lee. “That has always been our position.”

Vinamilk is not on a list of 120 companies that government investment arm State Capital Investment Corp. plans to divest this year, news website Nhip Cau Dau Tu reported earlier this year, without saying where it got the information. F&N is Vinamilk’s second-biggest shareholder with a 11-percent stake, after the Vietnam government’s 45 percent.

Bottled Water

F&N’s main brands include the 100Plus isotonic drink and Ice Mountain bottled water, and it also distributes beverages produced by companies under its Thai owner, such as Oishi Group Pcl’s green tea drink and Thai Beverage Pcl’s Chang beer.

F&N is among the top three soft drinks players in Singapore, Thailand and Malaysia, according to Euromonitor International, but isn’t ranked among the top five in Vietnam, Indonesia and the Philippines, where the company is examining ways to grow.

Charoen has laid out a strategy of expanding across Southeast Asia after his companies completed the S$10.5 billion acquisition of F&N in February 2013. The Thai billionaire has set a target of making the food and beverage businesses of F&N and his other companies including Thai Beverage, Sermsuk Pcl and Oishi among the top three brands in Southeast Asia by 2020.

Still, F&N is wary of overpaying for acquisitions, Lee said. “There is a line we can’t cross because if we do that, we’re actually destroying value,” he said. “If you have to take a long time to justify the returns, you might as well use the money to build the business.”

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