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OUE 'tapping banks for possible F&N bid'

Publication Date : 24-10-2012


Property firm Overseas Union Enterprise (OUE) is tapping banks as it prepares a possible bid for Fraser & Neave (F&N) that would pit it against Thai tycoon Charoen Sirivadhanabhakdi.

Swiss bank Credit Suisse will advise the firm as it tries to raise billions in loans for a buyout attempt, Reuters reported.

OUE spokesman T.L. Woo declined to comment, as did a Credit Suisse spokesman.

OUE said last Friday that it is in talks with some parties and "considering all options" regarding F&N, including a bid.

This came barely a week after it made a S$1.4 billion (US$1.14 billion) offer for F&N's hospitality and serviced apartments business.

This was ignored by F&N's board as the conglomerate is still under the offer period of Charoen, the man behind Thai Beverage.

An official OUE offer for F&N would complicate matters for Charoen, whose vehicle last month offered S$8.88 per share, or about $8.8 billion, for the 70 per cent he did not already control.

Charoen has since raised the stake to almost 34 per cent. His offer lapses on October 29 but he may be forced to extend this or raise the price.

F&N's stock has shot past the S$8.88 level with investors betting on a bidding war. The counter closed flat at S$9.26 yesterday.

Charoen cannot accumulate stock at these levels unless he raises his general offer.

Analysts agreed that OUE would need financial support from bankers or partners to launch a takeover of F&N.

Reports raised the possibility of Japanese beverage company Kirin Holdings, F&N's second-largest shareholder behind Mr Charoen's parties, working with OUE on the bid.

OUE, whose shares gained three cents to S$2.74 yesterday, has a market value of S$2.49 billion, while F&N's market value is much higher at S$13.32 billion.

"After the potential sale of Mandarin Orchard and (Mandarin) Gallery and taking on some debt, OUE could then have about S$2 billion to invest in F&N," said a note by Standard Chartered analysts Regina Lim and Kai Yip.

"However, this would still be insufficient. OUE's low free float and steep discount to net asset value make equity issuance a challenge in our view."

Deutsche Bank said it would "not be surprising" for OUE to seek food and beverage or financial partners to launch a counter-offer, given its size and balance sheet constraints such as debt levels.

It noted that potential partners include Kirin, United States drinks giant Coca-Cola or units linked to the Indonesian Lippo conglomerate.

Deutsche Bank said Charoen's early-mover advantage means that a counter-offer from OUE "will need to be significantly more attractive".

OUE's controlling shareholder is Stephen Riady, a member of the family behind the Lippo conglomerate. He is based in Singapore.

US$1 = S$1.22


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