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F&N, APB add to gains as 3-way beer battle looms
Publication Date : 25-07-2012
Shares in Fraser and Neave (F&N) and its Asia Pacific Breweries (APB) unit continued rising yesterday as investors bet on an all-out battle for the brewer.
F&N's shares rose eight cents, or 1 per cent, to S$8 (US$6.35), bringing its two-day gain to 5 per cent, while APB stock added 25 cents, or 0.5 per cent, to close at S$48.74.
APB's shares have risen 16 per cent over two days but are still short of the S$50 offer by Dutch brewer Heineken in its S$5.1 billion bid for F&N's stake in it.
Trading in the shares was halted last Friday for the buyout offer announcement, but the stock has been on the rise since trade resumed on Monday.
Heineken's S$50 per share valuation of APB would be a historical peak for the counter, while F&N would also profit handsomely if it sells its stake.
There could be more fuel for investor optimism as more reports emerge that Japanese brewer Kirin Holdings, another beer company in the mix, could be preparing to bid.
Kirin, which has kept a low profile amid the stunning events over the past week, has hired Deutsche Bank to help defend its turf, according to a Reuters report yesterday.
That could set off a bidding war between Kirin, Heineken and Thai Beverage, the maker of Chang Beer. The three are entangled in a complex web of ownership in F&N and APB.
The saga started last Wednesday when Thai Beverage bought a large stake in F&N from OCBC Bank, its insurer affiliate Great Eastern Holdings and Lee Rubber Company, controlled by the Lee family behind OCBC Bank.
A company linked to Thai Beverage's controlling shareholder also secured a direct holding in APB, which makes Tiger beer.
Heineken made its move last Friday, offering F&N S$50 per share, or S$5.1 billion, for its APB stake. Heineken owns about 42 per cent of APB, with F&N holding 40 per cent.
F&N has engaged Goldman Sachs to evaluate Heineken's offer, according to Reuters.
It has until this Friday to decide, so all eyes will be on whether Kirin, or perhaps even Thai Beverage, makes a move before that.
The sale of the APB stake will most likely be considered a 'major transaction' that needs approval from F&N shareholders.
Observers said that even if F&N's management and board agree to sell the firm's APB stake to Heineken, F&N major shareholders Kirin and Thai Beverage could stand in the way. After all, APB is widely considered F&N's crown jewel.
Kirin holds about 15 per cent of F&N and Thai Beverage will have 22 per cent once it completes the acquisition of the shares from OCBC, Great Eastern and Lee Rubber Company.
If Kirin and Thai Beverage vote to block, it will be hard for other shareholders to push through the share sale, even at the attractive price.
Many individual shareholders from F&N's investor base of about 14,000 would need to turn up at the meeting to vote for the deal and overcome the two brewers' combined 37 per cent stake.
"There is a high chance that the (Heineken) bid will not succeed," said CIMB last Friday, adding that Kirin is likely to veto any sale. But Thai Beverage may not complete its acquisition by the time the vote takes place.
In that case, the voting rights at the meeting will remain in the hands of OCBC, Great Eastern and Lee Rubber Company. The question then is whether these parties will vote in accordance with Thai Beverage.
F&N has told the Singapore Exchange that Thai Beverage is a new 22 per cent substantial shareholder. But the completion of the sale is still subject to some conditions, including the approval of Thai Beverage shareholders, and the company is yet to take legal control of the shares.