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Heineken is preparing to sweeten its bid for Asia Pacific Breweries 10 days after an affiliate of Thai Beverage entered the battle for control with a S$1bn ($800m) offer that trumped the Dutch-based brewer’s initial bid on a per-share basis.
The hotly contested asset, a fast-growing Asian brewer already partly owned by Heineken, has prompted a bidding war that could lead to the break-up of its co-owner, Fraser and Neave, a Singapore conglomerate that owns soft drinks and real estate assets.
Heineken is expected to tender S$53 a share for F&N’s direct and indirect interests in APB, according to people familiar with the situation, up from its initial $50 a share bid. That would raise the total consideration from an original S$5.1bn. There would also be a mandatory offer for the remaining shares.
The Dutch brewer’s hand was initially forced in July when companies associated with Thai Bev, Thailand’s leading spirits and beer company, said they would acquire stakes in F&N and APB.
However, Heineken’s S$50 a share bid was followed on August 7 by a partial S$55 a share bid from an affiliate of ThaiBev, known as Kindest Place and owned by the son-in-law of Charoen Sirivadhanabhakdi, ThaiBev’s chairman.
Ian Shackleton, analyst at Nomura, said APB’s market capitalisation was far higher than ThaiBev’s, “therefore we think that any bid here would be unlikely without some financial support from a third party”.
Heineken, which is eager to secure its interests in Asia, had been expected to pay up rather than quit the race. Bankers reckon Kindest Place acted to push Heineken into putting more money on the table – and that ThaiBev is equally interested in F&N’s soft drinks and real estate assets, in any case.
While some analysts and investors have questioned the rich price tag its offer puts on APB, they say the brewer can afford even the inflated price tag without resorting to a rights issue.
According to Bernstein Research, the $50 a share offer represents a trailing enterprise value/earnings before interest, tax, depreciation and amortisation of 14.4 times for the 58 per cent stake it does not own and a 44 per cent premium on the undisturbed share price.
Analysts have also questioned what synergies Heineken can squeeze out of the deal, given its existing management role, making it harder to justify the premium.
“As yet, it is unclear what will be the incremental synergies for Heineken,” wrote Trevor Stirling of Bernstein Research in a report. “In theory, APB already has access to Heineken’s best practice.
But that was also the case at Baltika, and Carlsberg still found major savings when it bought out S&N’s stake. Therefore, Heineken could perhaps extract synergies out of APB which could represent 6-8 per cent of APB net sales.”
However, bankers have warned that there are many moving parts in what is a fiendishly complex deal, thanks to APB’s structure, and the fresh bid remains subject to discussions.
Trading in F&N and APB was halted in Singapore at the companies’ request. Both cited “pending release of an announcement”.