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F&N Shareholders Offered $3.2 Billion Tiger Sweetener

Jeremy Grant, Financial Times

Fraser and Neave, the Singapore conglomerate at the center of a bid battle for Asia Pacific Breweries, will hand shareholders S$4bn, or 84 per cent, of the net gain of the sale of its stake in the maker of Tiger beer to Dutch brewer Heineken if the deal is voted through.

Beer Bar

The decision, disclosed by the company late on Friday, will be closely scrutinized by shareholders in F&N since they hold the key to tipping the balance in favor of Heineken in its battle for control of APB , one of Asia’s fastest growing brewers.

Heineken is pitted against Singapore-listed ThaiBev , Thailand’s largest brewer, over APB in a complex battle in which F&N’s survival as an independent company could yet influence whether Heineken succeeds in winning APB.

The latest development caps weeks of intense maneuvering in what has become one of the highest-stakes bid battles in Asia in recent years.

That could still see the involvement of Japanese drinks company Kirin. Its intentions as a 15 per cent shareholder in F&N – making it the second largest shareholder – are as yet unknown.

Heineken’s chances of winning received a boost a week ago when F&N’s board recommended a sweetened offer from Heineken of S$53 a share, or S$5.6bn, for F&N’s 39.7 per cent interests in APB, in favor of a ThaiBev offer of S$55 a share for only 7.3 per cent of the Tiger beer brewer.

F&N also agreed to pay the Dutch brewer a S$56m break fee if F&N shareholders failed to accept the offer, by a simple majority under F&N’s rules.

However such a majority is not necessarily assured. ThaiBev is F&N’s largest single shareholder, and could yet muster just enough support to block the recommended Heineken offer, some analysts suggest. However, it could only do this with the support of Kirin and other shareholders.

ThaiBev also could trigger a general offer for F&N by increasing its holding in F&N to 30 per cent, a threshold that would make such a move mandatory under Singapore listing rules.

ThaiBev has made repeated purchases of F&N shares in the open market in recent weeks, adding to an existing 22 per cent stake it acquired this month from a Singapore bank, bringing its total holding to 26.4 per cent.

On Friday shares amounting to 2.5 per cent of F&N changed hands in a block trade amid market speculation that ThaiBev was the purchaser.

ThaiBev brews Thailand’s best-selling Chang beer, but its founder and controlling shareholder, entrepreneur Charoen Sirivadhanabhakdi, is believed also to want to expand ThaiBev’s parent company’s property interests, possibly by acquiring F&N’s property portfolio. F&N also has a large soft drinks business in Southeast Asia, mostly Singapore and Malaysia.

However analysts have questioned whether ThaiBev has the financial muscle to mount a takeover for F&N, without resorting to its parent, Charoen’s privately-held TCC Group.

On Friday F&N’s board signaled its determination to remain independent if the Heineken deal succeeded. The board said it would “continue to seek growth in remaining businesses of F&B [food and beverage] and properties”, pointing out that the company has undrawn credit facilities of S$3.6bn.

F&N said that, if shareholders approved Heineken’s sweetened offer, it would distribute about S$4bn from the cash proceeds to shareholders, which include Eastspring, as insurer Prudential’s asset management was recently renamed.

The rest of the proceeds of about S$1.6bn, would be use to pay down debt and “strengthen the balance sheet” of F&N, the company said.

F&N also said that it would cancel one share for every three shares held, and pay a cash distribution of S$8.50 for each cancelled share. F&N’s shares closed on Friday up slightly at S$8.45.

The next formal step is for F&N to issue a shareholder circular, which could take up to seven 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.