- By Region
Just when it seemed that another high-stakes twist in the battle for control of Asia Pacific Breweries, the maker of Tiger beer, could not be possible, Heineken has delivered one.
The Dutch brewer late on Friday said the board of Fraser and Neave, a Singapore conglomerate, had agreed to recommend to shareholders an improved offer of S$53 a share, or S$5.4bn (US$4.3bn), for F&N’s 39.7 per cent stake in APB.
That was an improvement on a S$50 a share offer made three weeks ago.
For the past two weeks, Heineken was on the back foot in what has become one of the most hard-fought – and complex – bid battles in Asia in recent times.
Heineken wants control of APB because it is one of the few Asian brewers left offering exposure to markets that have been growing rapidly as European beer sales have stagnated.
Heineken already has a 32.4 per cent stake in a joint venture through which it and F&N run the Tiger brewer. That venture is also the vehicle through which Heineken is distributed in key APB markets such as Vietnam.
The Dutch brewer’s ambitions to take full control of APB were frustrated two weeks ago when an unlisted vehicle called Kindest Place, affiliated with the controlling shareholder in Thai Beverage, countered Heineken’s S$50 a share offer with an unusual manoeuvre. It offered S$55 a share for a separate 7.3 per cent stake held by F&N directly in APB.
That signalled that the Thai company valued APB at about 10 per cent more than Heineken. F&N’s nine-member board was thus faced with a conundrum: whether or not to recommend the Kindest Place offer, having already recommended Heineken’s original offer.
On Friday the board eventually threw its weight behind a new Heineken offer, noting that while Kindest Place’s offer was “marginally higher than Heineken’s on a per share basis”, it was only for F&N’s 7.3 per cent stake.
Lee Hsien Yang, F&N chairman, said: “The sale of F&N’s stakes in APB in its entirety to Heineken at the improved price would better maximise overall returns for F&N shareholders.”
F&N has also agreed to pay Heineken a S$56m break fee if the proposed transaction is not done within 120 days on account of F&N’s shareholders voting against Heineken’s new offer.
Christopher Wong, senior investment manager at Aberdeen Asset Management in Singapore, says: “The break up fee makes it expensive for shareholders in F&N to walk away. I think it’s clever from a Heineken perspective.”
The next step is for F&N to issue a shareholder circular, which could take up to eight weeks. That will be followed by a shareholder meeting, possibly by the end of November. Heineken said it expects the transaction to be completed no later than December 15.
Yet a vote in favour of Heineken’s offer is not assured. That is because ThaiBev – which is believed to harbour designs of F&N’s property business as well – has become the largest shareholder in F&N, with 26.4 per cent. Kirin, the Japanese drinks company, is next with 15 per cent with Prudential, the insurer, third.
ThaiBev would need to muster slightly more than Kirin and Prudential’s votes to give it the simple majority needed to block a Heineken offer. This is why investors will be watching Kirin, which has yet to show its hand.
Heineken said its latest offer is final. Shareholders likely will be relieved, because the offer represents a price/earnings multiple of 35 times the last 12 months’ APB earnings – at the upper end of valuations in the beer sector.
Meanwhile few are willing to rule out further surprises. “In most M&A transactions it’s not unusual for an element of game theory,” Mr Wong says. “But this is on another level.”