Heineken Wins the Two-Month APB Battle with ThaiBev

on Sep 28, 2012

On 28 September 2012, Heineken (AMS:HEIA) announced in a press release that shareholders in Fraser and Neave (SGX:F99) have approved the Dutch brewer’s offer for F&N’s 40 percent stake in Asia Pacific Breweries (SGX:A46), maker of Tiger beer. The approval marks Heineken’s victory after a two-month battle with Thailand’s biggest brewer, ThaiBev (SGX:Y92).

The Financial Times reports that the offer of the Amsterdam-based brewer amounted to S$5.6 billion (£2.8 billion), a price that can be considered as extremely high for the sector, at some 17 times earnings before interest, tax and amortisation. “We pay the full price, but it is worth the last dollar we pay if we take into consideration the growth opportunities in that region,” said the company’s CEO Jean-Francois van Boxmeer, as quoted by the FT. On a conference call, Mr van Boxmeer noted that Asia was “always the weakest” in the company financials, but now expects the region to account for 15 percent of profit, “which will obviously further grow.”

“The move increases Heineken’s growth prospects and ensures its position among the leading brewers,” notes Zsuzsa Szilagyi, an analyst at the market research company Euromonitor International, as quoted by Bloomberg. The Dutch brewer’s shares went up 1.2 in Amsterdam trading, the second-strongest in the STOXX European food and beverage index, according to Reuters data.

!m[](/uploads/story/487/thumbs/pic1_inline.png)As noted in Heineken’s press release, the transaction, which is still subject to regulatory approval in Singapore and New Zealand, is expected to close in November, following which APB will be fully consolidated into the company accounts.
The Dutch brewer was forced to raise its initial offer due to the battle with ThaiBev, after Thai billionaire Charoen Sirivadhanabhakdi, who controls ThaiBev, acquired stakes in both APB and F&N. Bloomberg reports that Heineken increased its original S$50-a-share bid to S$53 in August, as recommended by the F&N management.

Mr Charoen’s agreement to eventually support the deal with Heineken, however, has spurred speculation that he would break up F&N. Bloomberg quotes Ng Soo Nam, chief investment officer at Nikko Asset Management, as saying that it is only the beverage and the property business that is left after the sale. “Those are probably interesting assets to the ThaiBev group. This could be part of their geographic diversification.” Reuters quotes Deutsche Bank analyst Gregory Lui who said in a client note that ThaiBev could fund acquisitions to grow F&N’s business, or to make distributions which may be more amenable to ThaiBev. To make matters more complicated, F&N’s shareholders voted down a proposal by the board to pay out S$4 billion (£2 billion) to shareholders via a planned capital reduction after Mr Charoen voted against the resolution, preventing it from reaching the required 75 percent support.

The FT reports that there is also uncertainty regarding the role of Kirin (TYO:2503), the Japanese drinks company which is the second-largest shareholder in F&N with a 15 percent stake. Hirotake Kobayashi, the Kirin member of the F&N board noted that the company had not yet decided whether to sell its stake. “It’s not necessary to make a decision today, there is no rush and we have plenty of time to consider,” said Mr Kobayashi as quoted by the FT.


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