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Heineken blinked. The brewer raised its bid for Singapore’s to S$53 a share or $4.46 billion under pressure from a Bangkok beer family. The Thais could hold out for even more, but would be wise not to.

About a month ago Thai beer baron made a $3-billion leveraged bet that looks about to pay off. By buying stakes in both APB, maker of Tiger beer, and Fraser & Neave, the company that controls through a joint venture with Heineken, he accumulated a 17 per cent interest. His risk was limited by the companies’ strong cash flows, although the dividends wouldn’t likely cover his interest expense.

The bet was that Heineken would buy him out at a profit, but the first S$50 a share offer left Charoen underwater, thanks to the depressed price of F&N. Then his son-in-law pushed Heineken to up its bid by offering to pay S$55 a share for the 7.3 per cent of APB F&N owns directly. At current prices, Charoen’s total investments are marginally in the black. He could do much better, if cash from the sale of APB and the prospect of a break-up push up the F&N share price.

F&N’s board is eager for a deal on APB. It approved Heineken’s first offer and has agreed to pay a $45-million break fee if the new deal falls apart. Still, Charoen could try to block this deal and hold out for yet more.

It wouldn’t be easy, since he’d need to add Japanese brewer Kirin’s 15 percent stake in F&N to his family’s 26.2 per cent to have a chance at the 50 per cent required to vote against the board. The Thais could also refuse to sell their roughly eight per cent stake in APB, whatever the other shareholders do. Under Singapore’s rules, Heineken couldn’t squeeze them out.

But such an aggressive strategy could easily backfire. Heineken would lose nothing by walking away, whereas the Thais stand to lose a lot. Assuming F&N and APB sank to their pre-deal prices, Charoen would be about $720 million underwater. Time to fold.

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