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Profiteering not motive behind bid, says Thaibev

Publication Date : 10-08-2012


Thai Beverage and its ally genuinely aim to secure sizeable stakes in both Fraser & Neave (F&N) as well as Asia Pacific Breweries (APB), in a bid to establish a strong overseas network, a source at the beverage company said.

The source flatly denied speculation that ThaiBev - controlled by liquor tycoon Charoen Sirivadhanabhakdi - and Kindest Place Groups, a unit owned by Charoen's son-in-law Chotiphat Bijananda, aimed to net billions from a fight against Heineken.

"Through the decision to top up Heineken's bid, the group is determined to build interests in both ventures, for fast expansion. Pricing is just another matter," he said.

ThaiBev now owns 24 per cent in F&N, a long-time partner of Heineken which together established APB. Kindest Place on Tuesday made an unsolicited bid for 18.8 million shares F&N owns in APB, or 7.3 per cent, offering 55 Singapore dollars (1,400 baht) for each of the shares, 10 per cent higher than Heineken's S$50 (US$40) offer for F&N's entire APB holding. Kindest Place Groups already owns 8.6 per cent of APB, the brewer of Tiger beer.

"Our strategy is to expand our business regionally. F&N would pave the way for growth in food and beverage while APB would ensure our expansion in the regional beer market," the source said. "On our own, the expansion would be slow. This will be a short-cut. Tiger has a history and marketing channels, and this will quicken our regional expansion pace."

ThaiBev was recently granted a S$2.8-billion (US$2.24 billion) loan facility by three international banks for the acquisition. The group has also approached major Thai banks, including Bangkok Bank, Krungthai Bank and Kasikornbank for additional financing.

"We stand ready for discussions on terms and conditions," said an executive at a Thai bank who asked not to be named. "Things are not quite resolved as the transaction is in Singapore dollars while Thai banks lend mostly in US dollars and baht. ThaiBev will need to weigh foreign exchange risks."

The banker admitted that this is a big deal and Thai banks are also subjected to a strict rule that stipulates that loans to a business group must not exceed 25 per cent of its capital fund. Still, he is convinced that the group prefers a bridge loan facility and could later issue new shares, to reduce the interest cost.

"Profiteering" is rumoured to be the reason behind ThaiBev Group's move, which raised tension over the tussle for APB. If Kindest Place's move is successful, its stake will rise to 16 per cent.

According to Singaporean newspaper The Straits Times, at this point, with Kindest having bought its 8.6 per cent in APB at S$45 a share, if Heineken raised its bid to S$55, this would give it a S$10 paper profit on the purchase. Another advantage is if the value of APB rises, as Kindest has offered S$55 per share, this makes F&N more valuable and so makes Thai Beverage's investment in F&N more valuable too.

"This means that by making such an offer, Kindest and Thai Beverage stand to enjoy these benefits and yet face only a very small risk that F&N will take it up. Kindest has, in effect, raised the stakes for both the Heineken and F&N boards, with very little cost to itself, at this point. It is probably going to be able to achieve a higher price for its stake without having to shell out a cent," the daily said.

The daily noted that if F&N decides to sell its 50 per cent stake in the joint venture vehicle Asia Pacific Investment to Heineken, the Dutch brewer would still be the largest shareholder and Kindest would be a distant second in terms of control.

Heineken is unlikely to accept an outcome where Kindest becomes a third party. It would much rather have a clean sale. With Heineken unlikely to want this interloper, it will have no choice but to raise the price in order to buy all of F&N's direct and indirect interests in APB.

For F&N's part, it is unlikely to want to sell only this small stake to Kindest Place. After all, what would it do with the rest of its stake in Asia Pacific Investment? Therefore, knowing that F&N shareholders may complain if it turns down the higher offer, the board will have little choice but to go back to Heineken to ask for a better price for the shares.

US$1 = 1.24 Singapore dollar


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