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Kirin may sell F&N stake: Analysts

Publication Date : 24-01-2013


Japanese brewer Kirin Holdings may well cash out on its Fraser & Neave (F&N) shares and invest its substantial gain in opportunities elsewhere, say analysts.

Kirin could reap a net profit of S$650 million (US$530 million) if it sells now - a handy war chest to take on an acquisition trail.

It paid S$6.50 a share for the bulk of its 14.8 per cent holding in 2010, so it could cash out with gains by taking the S$9.55 offer from Thai tycoon Charoen Sirivadhanabhakdi.

Analysts believe the Japanese firm would be tempted to bail out with its profits if it is jittery about the major changes expected at F&N under Charoen.

Still, Kirin can wait for Charoen's offer to go unconditional before it makes a decision, so it has plenty of time to weigh its options, said market watchers.

A Kirin spokesman said yesterday that no decision has been made about the company's stake.

Kirin had tendered its 14.8 per cent stake to Overseas Union Enterprise (OUE), which threw in a bid to rival Charoen's offer for F&N.

Charoen raised his offer to S$9.55 a share late last week - from S$8.88 earlier - to trump OUE's S$9.08 a share bid.

OUE threw in the towel on Monday, giving Charoen a clear run, while Kirin had its shares returned.

It now must choose whether to accept Charoen's offer or be content to remain a minority shareholder under him.

Kirin has seemed content to be a relatively passive investor in F&N since 2010 but with Charoen as the largest shareholder, things could be dramatically different.

"You can see F&N and Thai Beverage tying up a bit more in South-east Asia," said Jason Hughes, head of premium client management at IG Markets Singapore. "The F&N and ThaiBev connection is definitely cemented and the two businesses will work closely together from now on."

Singapore-listed ThaiBev is controlled by Charoen and brews Chang Beer.

As part of the OUE bid, Kirin had offered to buy F&N's food and beverage business for $2.7 billion if the OUE offer succeeded.

"Kirin's idea in trying to get their (F&N's) food and beverage business is to leverage on those supply chains chains that exist," said Hughes.

"If F&N is going to be used by (Mr Charoen) in that way, it might be best for Kirin to sell and look at other opportunities in the region, having made a good return on its investment."

DMG & Partners Securities analyst Goh Han Peng is less confident about what option Kirin might choose, noting that the firm itself has kept mum on its intentions.

Still, the feeling is that the money from selling the F&N stake will come in handy for Kirin, which has a market capitalisation of around 1.02 trillion yen (US$11.5 billion).

Goh noted that Kirin has been investing outside of Japan for some time as it seeks growth overseas to offset slow growth at home.

"I think it will continue to invest in the Asian region when the opportunity arises," he added.

Meanwhile, Charoen's investment vehicle, TCC Assets, bought more F&N shares on Tuesday, taking the stake held by his vehicles to 44.05 per cent.

This excludes valid acceptances to Charoen's offer, which will push his holdings even higher. He needs 50 per cent, including acceptances, by the February 4 deadline. If he manages this, the offer will turn unconditional and the deadline will be extended.

F&N shares were flat at Charoen's offer price of S$9.55 yesterday.

US$1 = S$1.23


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