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Thai tycoon faces mounting pressure to raise F&N bid

Publication Date : 11-10-2012


Thai tycoon Charoen Sirivadhanabhakdi is under pressure to increase his offer for Fraser & Neave (F&N) after two developments yesterday.

The first came in the morning when F&N announced that it has received an unsolicited S$1.4 billion (US$1.14 billion) offer for its hospitality and serviced apartments business.

A further twist came last night when F&N directors said that the Charoen offer was on the "low end" of valuations for the conglomerate with businesses in property, soft drinks, dairies and printing and publishing.

The result is yet more uncertainty for investors.

F&N said it will not respond to the unnamed bidder, citing takeover rules which say it cannot sell any material assets while Charoen's offer is in process.

But the new offer values the unit at a far higher price than is implied by Charoen's S$8.88 a share bid.

Analysts said the move could force the billionaire to raise his price, while investors might be content to wait out the offer period before looking for better suitors.

In the other development, F&N directors last night deemed Charoen's bid "not compelling but fair". They said the S$8.88 bid is at the low end of S$8.30 to $11.22, the estimated range of F&N's valuation calculated by its independent financial advisers.

The offer has driven F&N stock to about S$8.88 - its highest levels since at least 1984, when Bloomberg data on the company began.

But F&N directors noted that the historical prices may not fully capture the S$5.6 billion that F&N will get from selling its Asia Pacific Breweries (APB) stake plus other assets to Heineken.

Directors who hold F&N stock will not sell to Charoen at S$8.88 unless he manages to accumulate more than 50 per cent of the company's shares, last night's circular to shareholders noted.

Charoen's units hold more than 33 per cent of F&N.

The board includes chairman Lee Hsien Yang, who has 180,000 shares. He is also a trustee of the estate of his late grandfather Kwa Siew Tee, which has 408,240 shares. Director Nicky Tan has 50,000 shares.

The unsolicited offer for F&N's hospitality assets could also prove disruptive.

The Straits Times understands that Overseas Union Enterprise (OUE), the Singapore-listed property arm of Indonesian conglomerate Lippo Group, lodged the offer, although F&N did not name the bidder. OUE has been approached for its Mandarin Orchard Singapore and the adjoining Mandarin Gallery, worth a reported S$1.7 billion in total.

Observers said it could have been aiming to use the cash to buy F&N's serviced apartments business, which includes Fraser Suites in Singapore and Beijing.

OUE knows the takeover rules and that F&N cannot entertain a proper discussion now, said Jason Hughes, head of premium client management at IG Markets Singapore.

But the move "shows to F&N's board and shareholders that there is interest out there, and perhaps they can yield a better return if they open it up to other parties again". "It is a little bit cheeky to put the spanner in the works at this late stage," he said.

The offer also shows how valuable F&N's assets are, analysts said. Jonathan Foster, special situations group director of Religare Capital Markets, calculated that Charoen's S$8.88 a share bid values F&N's hospitality unit at S$600 million, less than half of the S$1.4 billion OUE is reportedly willing to pay.

The offer also undervalues F&N's other property businesses, he noted.

The Thais need to "seriously consider raising the offer" because "a lot more value can be achieved" by F&N systematically selling off its various assets, added Foster.

A spokesman for Thai Beverage, one of Charoen's firms that holds part of his F&N stake, declined to comment last night.

F&N stock rose five cents to S$8.93 yesterday, above the S$8.88 offer and a clear sign that some investors expect it to be raised.

Last month, Charoen - the man behind Thai Beverage which makes Chang Beer - offered S$8.88 per share to buy the 70 per cent of F&N not held by himself. His stake now exceeds 33 per cent after buying shares on the market.

The offer closes at 5:30pm on October 29. This may be extended if acceptances bring Charoen's stake above 50 per cent.


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