Thailand's Charoen poised to win control of Fraser & Neave

Thailand's Charoen poised to win control of Fraser & Neave
Thai billionaire Charoen Sirivadhanabhakdi

The long-running battle for Fraser & Neave seems to be over. Yesterday, Thai tycoon Charoen Sirivadhanabhakdi increased his stake in the Singapore property and food and beverage conglomerate to 44.05% after rival bidder Overseas Union Enterprises (OUE) declined to increase its offer after the weekend deadline set by the country’s Securities Industry Council.

Charoen’s unlisted vehicle TCC Assets had raised its offer to S$9.55 ($7.88) a share late on January 18 to meet the auction closing date for the mandatory general offer required by the regulator. On Monday, a consortium led by OUE, failed to revise its S$9.08 conditional cash offer made on November 15. OUE is run by Stephen Riady, son of Mochtar Riady, who controls Indonesia’s Lippo Group.

“The auction is concluded, and it is highly unlikely that a new bidder will appear at this late stage and when Charoen has such a commanding stake in the company,” said a person familiar with the process.

If successful, the acquisition will be the biggest public takeover by a Singapore-listed company, and the biggest ever M&A transaction in Southeast Asia.

Charoen increased his stake by 1.55 percentage points from 42.5% of the company through market purchases at S$9.55 on Tuesday, according to Singapore stock exchange filings yesterday, after buying 22.5 million shares on Monday. The offer price values Fraser & Neave at $11.2 billion, and is conditional upon buying 50% of the company by February 4.

Japanese brewer Kirin has a 14.8% holding, bought at S$6.50 a share. It had supported OUE’s November offer in return for buying Fraser & Neave’s food and beverage business for S$2.7 billion. Now it is simply looking at a tidy profit if it decides to accept Charoen’s offer.

On Tuesday, Fraser & Neave’s board “noted” that the auction process had ended, and is expected to recommend Charoen’s offer during the next few days, according to the person, subject to a positive “fair value” opinion by J.P. Morgan Chase, its independent financial adviser.

The US bank has already valued Fraser & Neave at between S$8.58 and S$11.56 a share, and had described both OUE’s S$9.08 price and Charoen’s earlier September offer of S$8.88 a share as “fair and not compelling”.

The company’s assets are approximately two-thirds real estate and one-third food and beverages, based on the midpoint of the IFA sum-of-the-parts valuation, which excludes S$5.59 billion of cash received from the sale of Asia Pacific Breweries (APB) to Heineken in August.

Charoen is advised by Morgan Stanley, DBS and UOB; and the two Singapore lenders are providing the debt financing for his bid. Goldman Sachs is advising Fraser & Neave, and the OUE group has been assisted by Credit Suisse, Bank of America Merrill Lynch and CIMB.

The pursuit of Fraser & Neave “has long been an old chestnut”, according to an analyst. Its mix of assets is “odd” and seems to defy industrial logic, he said. Charoen, whose interests also range from property to food and beverages — as well as other businesses — seems to be a suitable buyer.

The battle for the company has been protracted and full of twists.

On July 18, Charoen’s Thai Beverage bought a 22% stake in Fraser & Neave at S$8.88 a share, and special purpose vehicle called Kindest Place, controlled by his son-in-law, purchased an 8.6% stake in APB at S$45 a share. APB was a joint venture between Fraser & Neave and Heineken that makes Tiger Beer.

Two days later, Heineken made an offer to buy Fraser & Neave’s 7.3% direct interest and 32.4% indirect interests in APB at S$50 a share; then on August 7, Kindest Place offered to pay S$55 a share for the 7.3% interest. But, on August 15 Fraser & Neave accepted Heineken’s offer to acquire its entire interest in APB at S$53 a share subject to shareholder approval.

A month later, Thai Beverage increased its stake in Fraser & Neave to 28.9% through market purchases, while Charoen’s unlisted vehicle TCC Assets bought 1.37% of the company. TCC Assets then announced a Mandatory general Offer acting in concert with Thai Beverage to buy the remaining Fraser & Neave shares at S$8.88 each.

On September 19, the two Charoen companies said they would vote in favour of Fraser & Neave’s proposal to sell its APB holding to Heineken at S$53 a share in return for the Dutch brewer not making a general offer for Fraser & Neave. Kindest Place also agreed to sell its 8.6% stake in APB to Heineken.

Next, the battle focused on the remaining assets of the Singapore conglomerate.

On November 15, OUE made a voluntary conditional cash offer for Fraser & Neave at S$9.08 a share (trumping Charoen’s S$8.88 July offer), and Kirin gave its irrevocable undertaking to accept the offer in return for the food and beverage business. Kirin was advised by Deutsche Bank.

After several weeks impasse, the Singapore regulator forced the issue by announcing an auction that would close last weekend. On January 18, Charoen lifted its stake to 40.1% from 33.8% and announced a revised offer price of S$9.55 a share for its mandatory general offer. Meanwhile, OUE allowed its offer to lapse.

Fraser & Neave shares were trading at S$9.55 yesterday, having fallen about 2% since the beginning of the week.

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