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Kirin's bid for F&N unit fair but not reasonable, says JP Morgan
Publication Date : 01-01-2013
Investment bank JP Morgan has deemed Kirin's offer for Fraser & Neave's food and beverage unit to be "fair but not reasonable" from a financial viewpoint.
JP Morgan, the independent financial adviser to F&N's independent directors, issued the verdict yesterday after markets closed, but did not explain why it felt Kirin's offer was "not reasonable".
The Japanese brewer wants to buy F&N's food and beverage business for S$2.7 billion (US$2.21 billion) - within the S$1.88 billion to S$3.82 billion valuation JP Morgan put on the unit in a letter to F&N's independent directors released in a shareholder circular on December 20.
JP Morgan said then that Kirin's offer was "not compelling but fair", and did not say whether it thought it "reasonable".
The Kirin offer is part of a S$13.1 billion bid by a consortium led by Overseas Union Enterprise (OUE) to buy out F&N.
It involves Kirin, in turn, buying the food and beverage unit, a move that will make the F&N purchase more financially viable for the OUE group.
But OUE will only sell the food and beverage arm to Kirin if the offer is deemed both "fair and reasonable" by the independent adviser, F&N said in the December 20 circular.
It added that Kirin was "entitled but not obliged" to revise its S$2.7 billion offer to meet this condition.
Jason Hughes, head of premium client management at IG, told The Straits Times yesterday that JP Morgan's verdict could strain the alliance between OUE and Kirin as the brewer would feel pressure to increase its offer.
Kirin is F&N's second largest investor with 14.8 per cent.
OUE offered S$9.08 apiece for each F&N share in November. The offer is being made by OUE Baytown, an entity 50 per cent held by OUE and the rest by investment funds under United States-based Farallon Capital Management and Noonday Global Management.
It is conditional upon the consortium receiving acceptances of at least 50 per cent.
F&N's independent directors said on December 20 that OUE's bid was on the "low end" of the share's valuation of S$8.58 to S$11.56.
OUE's offer price is higher than a rival offer of $8.88 per share lodged by Thai tycoon Charoen Sirivadhanabhakdi in September after he began accumulating shares in July. JP Morgan said this offer was "fair but not compelling" in October.
Hughes noted that the JP Morgan verdict yesterday meant that OUE's consortium buyout "could end up being less of a team effort", which would benefit Charoen.
Charoen is F&N's largest investor. His parties, Thai Beverage and TCC Assets, own almost 34 per cent.
The Thai offer expires tomorrow; OUE's on Wednesday.
According to Singapore's takeover regulations, both parties have until Jan 21 to lodge final offers.
F&N shares closed three cents higher at S$9.70 yesterday.
US$1 = S$1.22