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Heineken wins Fraser and Neave backing for sweetened APB bid

by Renee Cordes | Published August 20, 2012 at 12:04 PM

Heineken NV on Sunday, Aug. 19, won a key victory in Asia after raising its bar tab for a controlling stake in Asia Pacific Breweries Ltd. to prevent a Thai suitor from spoiling its pursuit of the Singapore-based maker of Tiger beer.

Amsterdam-based Heineken, which already owns 42% of APB, late Friday raised its offer for Fraser and Neave Ltd.'s nearly 40% stake to 53 Singapore dollars a share, or S$5.6 billion ($4.5 billion), from an initial bid of S$50 a share.

In a filing to the Singapore Stock Exchange on Sunday, Fraser and Neave said that the sale of its stake at the higher price "would better maximize returns to its shareholders," who must vote on the bid at a specially convened meeting.

Heineken chairman and CEO Jean-François van Boxmeer had said Friday the increased offer was the brewer's final one. "Our Asian headquarters will continue to be based in Singapore," he added in the statement, "and we remain 100% committed to the growth and success of APB and the Tiger brand, just as we have been for the last 81 years."

Heineken said the new offer represents a 5.4% premium over the one-month, volume-weighted average price per APB share before the first agreement, and a price/earnings multiple of 35.1 times for the 12 months ending June 30.

Analyst Richard Withagen of SNS Securities NVN in Amsterdam noted Monday that while an already expensive deal for Heineken is now even pricier, "we still believe the deal to be compelling for Heineken from a strategic perspective."

Heineken shares gained 1.5% on the NYSE Euronext Amsterdam exchange to trade at just below €43.81 Monday morning, for a total market value of about €39.1 billion ($25.3 billion). Trading in APB shares is scheduled to resume in Singapore on Tuesday.

Heineken was jolted into making an offer for APB last month after Thai Beverage PCL, a company controlled by Thai billionaire Charoen Sirivadhanabhakdi, agreed to buy 22% of Fraser and Neave, a holding which it has meanwhile increased to 26%.

Earlier this month, Kindest Place Groups Ltd., a firm owned by Sirivadhanabhakdi's son-in-law, bought 8.6% of APB and subsequently offered to buy 7.3% of the brewer from Fraser and Neave for S$55 a share -- putting pressure on Heineken to return with a higher offer.

If it goes ahead, the acquisition will be the largest for the world's No. 3 brewer since its 2010 purchase of the beer operations of Coca-Cola Co. bottler Fomento Economico Mexicano SAB de CV, or Femsa, for $7.4 billion. Last year, Heineken lost out to Anheuser-Busch InBev NV in the fast-growing Dominican Republic market when its larger rival paid about $1.24 billion for Heineken's 9.3% stake in Presidente brewer Cerveceria Nacional Dominicana.

Heineken's deal in Singapore is not subject to due diligence, nor is it conditional on financing, but it does require approval from Fraser and Neave shareholders and regulatory authorities. Once a share purchase agreement has been signed, Fraser and Neave is expected to set a date for the shareholders' meeting.

Heineken, which trails AB InBev and SABMiller plc in emerging-market exposure, plans to finance its acquisition from debt, including through €1.75 billion in bonds issued July 26.

Heineken is taking advice from Credit Suisse Group's David Serre and Citigroup Inc., along with Singapore law firm Duane Morris & Selvam LLP, while Fraser and Neave has enlisted Goldman, Sachs & Co.

Credit Suisse and Citigroup also acted as bookrunners for Heineken's recent €1.75 billion bond issue, which also included ING Bank NV, ABN Amro Bank NV, Banco Bilbao Vizcaya Argentaria SA, Crédit Agricole SA and others.

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