Heineken wins control of Tiger beer maker

Focus shifts to F&N, trading of F&N shares was suspended on Friday

Heineken NV won full control of the maker of Tiger beer on Friday after shareholders of its Asian partner, Fraser and Neave Ltd (F&N) , voted in favour of selling the conglomerate's stake in the brewer for $6.3 billion.

The vote ends a two-month battle between Heineken and companies linked to Thai billionaire Charoen Sirivadhanabhakdi for control of Asia Pacific Breweries (APB) , which makes several other popular brands of beer and operates 30 breweries across 14 countries.

The spotlight is now on F&N over a $7.2 billion bid for the rest of the conglomerate by Charoen through Thai Beverage PCL and TCC Assets Ltd. The Thais control 30.7% of F&N, which will remain a large player in the property and soft drinks businesses after the APB sale.

 

The Thais could have tried to block the sale of F&N's 40% stake in APB to Heineken but said last week they would vote in favour of the deal. The Dutch brewer, in turn, agreed not to make a competing bid for control of F&N.

Heineken, already the owner of nearly 56% of APB through an 81-year-old venture with F&N, sought full control of the brewer to ward off Charoen's advances and protect its interests in Asia's fast-growing beer market.

While the Thais have given their approval for the APB sale, they are not yet ready to funnel back the proceeds to shareholders.

A proposal by F&N's board to pay out S$4 billion to shareholders via a capital reduction failed at the shareholders' meeting due to opposition from the Thais. The motion required 75% support but got only 54%.

"This move gives ThaiBev and TCC greater influence over the use of proceeds from the APB divestment as F&N's largest single shareholder," Deutsche Bank analyst Gregory Lui said in a client note seen by Reuters.

"ThaiBev/TCC could use the capital to fund acquisitions to grow F&N's business, or to make distributions which may be more amenable to ThaiBev/TCC."

By keeping the S$4 billion within F&N, the Thais would also make it more expensive for a third party to launch a counterbid for the conglomerate, other analysts and bankers have said.

The Thai group's offer for the rest of F&N that it does not own expires on October 29.

Trading of F&N shares was suspended on Friday.

Second-biggest shareholder

Japan's Kirin Holdings Co Ltd, F&N's second-biggest shareholder with a 15% stake, is still holding out for potentially a higher price, banking sources said.

The Japanese brewer was exploring options including selling its F&N stake to Thai Beverage or another potential buyer, sources with direct knowledge of the matter told Reuters on Friday.

Kirin has not indicated any intention to sell, F&N's financial controller Hui Choon Kit told a news conference in Singapore after the shareholders' meeting.

The Japanese brewer said previously it was interested in F&N's food and non-alcoholic drinks business.

Kirin bought the stake in F&N for S$6.50 a share from Singapore state investor Temasek Holdings Pvt Ltd in 2010.

In a meeting attended by more than 500 shareholders, shareholder activist Mano Sabnani described the Thai offer price of S$8.88 per share as "lacklustre."

"My view is the breakup value of F&N is about S$10 and I think most analysts would agree with me," Sabnani said to the applause by some shareholders at the meeting in an air-conditioned tent set up near F&N's office.

F&N Chairman Lee Hsien Yang, in response, said the board needs to study it first.

F&N officials told shareholders, including two units of British insurer Prudential PLC, that the conglomerate will seek to expand its other businesses after the sale of APB.

F&N retains a small interest in the beer business through a Myanmar joint venture that produces Myanmar Beer, the country's best-selling beer.

The group does not intend to sell its stake in Myanmar Brewery but is instead keen to grow the business, F&N's Hui told reporters.

F&N is the leader in the soft drinks markets in Singapore and Malaysia, with a 24.5% and 26.9% market share, respectively, according to Euromonitor. But F&N's reach in the rest of the region is weak and its Asia-Pacific market share is only 0.3%.

F&N's property portfolio, worth more than S$8 billion, has also attracted the interest of Blackstone Group LP and global property companies, sources have told Reuters, while the beverage business could appeal to potential suitors such as Coca-Cola Co.