Heineken’s latest takeover may trigger aftershocks in Southeast Asian finance. The Dutch brewer is paying $6 billion, or a hefty 17 times Ebitda, to take control of Asia Pacific Breweries from partner Fraser and Neave. Heineken had little choice, as it couldn’t let APB — and hence the linchpin of its Asian strategy — slip through its fingers. This sets up F&N’s next act — a breakup of the remainder of the conglomerate.
Heineken couldn’t afford to lose APB. While rivals have moved aggressively into the Chinese market, the largest in the world by volume, the Dutch brewer’s ambitions in China have been eclipsed by SABMiller and AB InBev. Heineken’s growth in Asia was dependent on APB, whose sales have grown faster than 10 per cent annually for the past decade. But some local rivals nearly upset Heineken’s plans. Japan’s Kirin bought a chunk of F&N. When Thai beer tycoon Charoen Sirivadhanabhakdi’s family bought stakes in F&N and APB a few weeks ago, it forced Heineken’s hand.
The deal offers something for everybody. Heineken may see less than a five per cent return on its investment, but it gets full control after nearly a century of partnership. F&N investors can’t complain either. While some might have hoped for a bidding war between the Thais and the Dutch, Heineken’s 42 per cent stake in APB made it nearly impossible for anyone else to bid. And, at a valuation about 40 per cent higher than the typical multiple for a brewer, according to recent deals compiled by UBS, it was hard for F&N to demand a higher price. The Thais, too, get a quick and tidy return on their trade.
More, F&N’s investors may receive another payoff in the coming months. F&N’s board has asked Goldman Sachs for advice. According to a Breakingviews analysis, the conglomerate’s parts, including a drinks business that Kirin and Coca-Cola may covet and a big property portfolio, are worth about S$9.50 a share after factoring in Heineken’s purchase of APB. That’s more than a 15 percent premium to the current market value. F&N’s disposal of APB shows the rewards of dismemberment.
