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Heineken's APB offer faces new challenge

by Renee Cordes | Published August 7, 2012 at 1:27 PM

Heineken NV's pursuit of Asia Pacific Breweries Ltd. hit choppy waters Tuesday, Aug. 7, when a company affiliated with Thai billionaire Charoen Sirivadhanabhakdi made an unsolicited bid for Fraser and Neave Ltd.'s direct 7.3% stake in APB, the maker of Tiger beer.

In a filing to the Singapore Stock Exchange, drinks-to-property conglomerate Fraser and Neave said that Kindest Place Groups, owned by Sirivadhanabhakdi's son-in-law Chotiphat Bijananda, had offered to buy its 18.75 million shares in Asia Pacific Breweries for 55 Singapore dollars a share, or a total of S$1.03 billion ($829 million).

The price is 10% above Heineken's S$50 a share offer for Fraser and Neave's 39.7% direct and indirect stake in Asia Pacific Breweries, which is already backed by Fraser and Neave's board of directors. The bid by Heineken, which already owns 42% of Asia Pacific and looks to gain control of the venture in a key emerging market, is worth S$5.1 billion.

Fraser and Neave is advising investors to hold off on taking any action with regards to the new unsolicited offer, which is due to expire Aug. 16. "The board of the company will review and evaluate the offer," it said.

A spokesman for Amsterdam-based Heineken underscored that the unsolicited bid is "not at all comparable" to its own offer, which involves "a bigger sum of money on the table to consider."

"We believe that Heineken's offer provides excellent value for all of Fraser and Neave's shareholders because it relates to Fraser and Neave's total shareholding in Asia Pacific Breweries," the Heineken spokesman said.

The Dutch brewer unveiled its proposal two days after Sirivadhanabhakdi's Thai Beverage PCL struck a S$2.78 billion deal for stakes in Fraser and Neave and Asia Pacific held by Oversea-Chinese Banking Corp. Ltd. and its Great Eastern Holdings Ltd. insurance unit, and the closely held Lee Rubber Co. (Pte.) Ltd.

Heineken, which trails larger rivals Anheuser-Busch InBev SA/NA and SABMiller plc in emerging-market exposure, plans to finance its acquisition entirely from debt, primarily through €1.75 billion ($2.17 billion) in bonds issued July 26.

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 bottler Fomento Economico Mexicano SAB, or Femsa, for $7.4 billion.

Heineken's deal 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 an extraordinary general meeting.

Tuesday's news drove Heineken shares down 2.25% on the Euronext Amsterdam exchange to €44.45 in afternoon trading. Shares had fallen as low as €43.87.

"The fear was that ThaiBev was not happy with Heineken's bid, which is now confirmed," said Richard Withagen, an Amsterdam-based analyst with SNS Securities NV. Still, he said there's no pressure on Heineken to act immediately. "Basically it's up to Fraser and Neave's board to decide what they want to do. There is no reason for Heineken to change its offer as it stands right now."

Heineken's pursuit of Asia Pacific has already fueled expectations that Fraser and Neave's nonbeer food and drink assets could be up for grabs, with Coca-Cola Co. and Japan's Kirin Holdings Co. (which owns 14.7% of Fraser and Neave) considered the most likely suitors.

Fraser and Neave's holdings include a dairy business with S$1.1 billion in 2011 sales as well as a soft drink business, led by 100Plus and F&N Seasons brands, with S$759 million in annual sales. It also has a real state business.

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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