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UPDATE 2-F&N rebuffs $1.1 bln bid for hospitality, residence unit

* Charoen offered $7.2 bln to take over whole of F&N

* F&N advisor says Thai offer not compelling though fair - sources

* Thai Beverage shares close 5 pct higher

(Adds F&N advisor, updates share prices)

By Eveline Danubrata

SINGAPORE, Oct 10 (Reuters) - Singapore conglomerate Fraser and Neave Ltd (F&N) , the takeover target of a Thai tycoon, said it had rebuffed a S$1.4 billion ($1.14 billion) bid for its hospitality and serviced residence business.

Overseas Union Enterprise Ltd , backed by Indonesia's Lippo Group, made a bid for the F&N unit, two sources with knowledge of the matter said, declining to be identified because the information is confidential.

The bid came as F&N's board is weighing Thai billionaire Charoen Sirivadhanabhakdi's $7.2 billion offer to take over the whole of the Singapore conglomerate.

Sources said J.P.Morgan, the financial advisor to F&N's independent directors, had called the Thai offer fair though not compelling, although it was not clear how the lukewarm rating would influence the board.

"The bid could reinforce the idea that F&N's assets are not fully appreciated, at least in the offer price," said Jit Soon Lim, an analyst at Nomura, who has a 'buy' rating and a S$10.19 target price on F&N stock.

"F&N has developed over many years a good brand franchise for its serviced residence business and they have underlying assets as well."

F&N will not respond to the S$1.4 billion offer for its hospitality and serviced residence business, the conglomerate said in a stock filing early on Wednesday, without identifying the bidder.

F&N, which also has soft drinks, dairy and publishing segments, said the business is an integral part of its property arm and it is still considering Charoen's takeover offer.

The Singapore conglomerate agreed last month to sell its 40 percent stake in Tiger beer maker Asia Pacific Breweries

to Heineken NV .

Overseas Union Enterprise, a Singapore hotel and property firm, declined to comment.

THAIBEV SHARES

Shares of Thai Beverage PCL , controlled by Charoen, closed 5.1 percent higher on Wednesday after F&N said it had received the bid. F&N shares closed up 0.6 percent at S$8.93.

Companies linked to Charoen are collectively F&N's largest shareholder with a 33.5 percent stake. Japan's Kirin Holdings Co Ltd is F&N's second-biggest with nearly 15 percent.

In the last few weeks, units of British insurer Prudential PLC have pared their F&N stake to about 4.8 percent from around 7.8 percent.

F&N's property portfolio has attracted the interest of Blackstone Group LP and global property companies, sources have told Reuters, while the beverage business could appeal to potential suitors such as Coca-Cola Co and Kirin.

($1 = 1.2305 Singapore dollars)

(Additional reporting by Charmian Kok; Editing by Ryan Woo)

((eveline.danubrata@thomsonreuters.com)(+65 6403 5669)(Reuters Messaging: eveline.danubrata.reuters.com@reuters.net))

Keywords: FRASERANDNEAVE OUE/