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Kwanchai Rungfapaisarn

The Nation

Publication Date : 23-01-2013

Thai tycoon Charoen Sirivadhanabhakdi is expected to seek additional borrowing on his own to finance the takeover of Singapore's Fraser and Neave, as his flagship business Thai Beverage risks a rating downgrade should its debt level escalate further.

A source close to the matter said Charoen was looking for new loans from Singaporean banks to finance the takeover, which could amount to 13.75 billion Singapore dollars (US$11.1 billion) if all shares are bought.

To date, ThaiBev, which started to build up its stake in F&N in July, has borrowed S$3.3 billion through syndication. It now holds 29 per cent in F&N, while TCC Assets - a non-listed business arm of Charoen - bought the remaining 11 per cent. As Overseas Union Enterprise has dropped out of the race and the final result of the race will be announced on February 4, Charoen will have to launch an unconditional offer for all shares of F&N.

Standard & Poor's Ratings Services, which recently assigned a negative outlook to ThaiBev's rating (BBB), yesterday announced that once the deal is closed, it would evaluate the credit implications for ThaiBev.

"In particular, we will assess how the integration of the different operations of F&N could influence ThaiBev's business and financial risk profiles. We will also seek more clarity about ThaiBev's plan to reduce its debt over the next 24 months, its dividend policy, and the likelihood of further debt-funded acquisitions," it said in a statement.

ThaiBev's leverage increased substantially after the debt-funded acquisition, with debt to debt plus equity spiking from 27.2 per cent at the end of 2011 to 62.8 per cent in September 2012.

With net worth of more than US$6 billion, Charoen is expected not to face any problems raising new loans. By raising the bid for F&N, the tycoon also demonstrated determination to grow his local business through F&N's network in the Asia-Pacific region.

F&N's network will be the tool to grow Thailand's largest food-and-beverage and property conglomerate in Southeast Asia and beyond. The move reflects Charoen's strategic expansion into food-and-beverage and property markets of Southeast Asia, which is booming in comparison with other regions.

An industrial source said yesterday that Charoen would acquire all F&N businesses, to be operated separately by his food-and-beverage and property empires.

According to a key message given earlier by Thapana Sirivadhanabhakdi, a son of Charoen and president and chief executive officer of ThaiBev, the acquisition of F&N is part of the company's strategy to expand its food-and-beverage and property empires in Southeast Asia and beyond by utilising F&N's rich distribution and business networks. At the same time, the company could bring F&N's products into Thailand to take new market opportunities and support its diversified portfolio.

"Becoming the major shareholder of F&N is a great opportunity, as it will contribute to synergy of both parties, and ThaiBev will gain exposure to the knowledge and experience of F&N's management team, which has keen expertise in the overall Asean region," Thapana said in the statement.

F&N has a history of more than 80 years in Southeast Asia and has three core businesses, namely food and beverase, properties, and publishing and printing. Its food-and-beverage business operates 31 breweries in 15 countries in Asia and the Pacific. As the largest beverage company in Singapore and Malaysia, F&N also owns a portfolio of renowned brands across multiple product classes and enjoys leadership positions in key markets. As such, ThaiBev believes F&N is highly complementary to its existing capabilities and will increase the group's profile in the food and beverage sector.

"Upon completion of the transaction, ThaiBev expects to expand its international coverage immediately. This is in line with the group's plans to grow its profile outside its predominantly domestic market focus, and allow it to tap a range of attractive demographics and consumer spending trends," Thapana said.

*US$1=1.2 Singapore dollars