The protracted M&A battle for Fraser & Neave (F&N), Singapore's 130-year old conglomerate, might be done and dusted but the restructuring remains a work in progress.
F&N has received the nod from the regulator to spin off its property arm Frasers Centrepoint on the exchange and shareholders are set to vote on the listing at an EGM on November 13. The listing would leave F&N as a predominantly food and beverage company.
However, given that TCC Assets, Thai billionaire Charoen Sirivadhanabhakdi's privately held vehicle, holds a 61.7% stake in F&N, and has said it would vote in favour, this is a mere formality. F&N only needs a 50% majority to go ahead.
The listing will not raise any fresh capital but will see each F&N shareholders receive two Frasers Centrepoint shares for every one F&N share owned.
The bigger question is what Charoen Sirivadhanabhakdi and his flagship company – Singapore-listed Thai Beverage – plan to do with their respective 61.7% and 28.6% stakes in F&N and the new property listing.
In late August, Thai Beverage appointed a financial advisor – reportedly Maybank Kim Eng – to assist with the evaluation of its equity ownership in F&N. In a statement, Thai Beverage said it had requested its advisor to consider various options including “retaining or exchanging its interest” in F&N and other possible ownership structures.
According to CIMB analyst Kenneth Ng, about a third of F&N’s revised net asset value comes from its consumer business and two-thirds comes from its property business.
After the listing of Frasers Centrepoint, Thai Beverage will end up with roughly a third of the property business, while TCC Assets already owns two-thirds of Fraser & Neave, which will be left with the food and beverage business after the restructuring.
Both those stakes are roughly equal in value, say Ng, which could make for a neat swap without having to fork out too much cash – so that TCC Assets ends up controlling Frasers Centrepoint and Thai Beverage controls F&N.
However, the restructuring could be complicated by a dispute between F&N and its joint venture partner Union of Myanmar Economic Holdings over Myanmar Brewery, which F&N holds a 55% stake in. The government-linked Union of Myanmar Economic Holdings claims it should have had an option to buy F&N's stake in Myanmar Brewery before TCC took control of F&N.
Sirivadhanabhakdi also faces another issue - which is raising the free float of F&N and Frasers Centrepoint so that they meet Singapore's listing requirements.
Collectively, both Sirivadhanabhakdi and Thai Beverage own about 90.3% of the company, and the remaining 9.7% is free float. This is slightly below the 10% free float required by the exchange for F&N and the 12% required for the new listing Frasers Centrepoint.
F&N stock trades at S$5.82, well below the S$9.55 per share that TCC Assets paid in its revised offer for F&N. (The company's share price has fallen partly because of its capital reduction exercise in July, when F&N returned about S$3.28 per share to shareholders).
The company is faced with a December 31, 2013 deadline to meet its minimum listing requirements. Collectively, Sirivadhanabhakdi and Thai Beverage plan to pare down their stakes in F&N from 90.3% to 88%, at most, through a share sale, prior to Frasers Centrepoint's listing.
The reclusive Sirivadhanabhakdi has long kept his cards close to his chest but investors are probably hoping its dispute in Myanmar does not hinder the restructuring – which is expected to unlock value.