Heineken’s nuclear option

In Uncategorized on 20/09/2012 at 5:09 am

(Or “Why Thai billionaire settled”)

Thai billionaire, Charoen Sirivadhanabhakdi, offered S$8.88bn (US$7.3 bn) in cash for the 70% stake in F&N that he did not already own. The belief was that that he wanted to kill the sale of F&N’s APB shares to Heineken.

Well he didn’t. Instead he has agreed to support the sale of F&N’s stake in APB to Heineken NV. As part of an agreement, Heineken said it will not make a general offer for shares in F&N under the Singapore merger code.

Below was the analysis I was planning to publish before news of the deal. Tot readers might be interested in my analysis on why he wouldn’t block the APB deal, and why he wouldn’t get F&N at $8.88.


The shareholders of F%N should note that about a third of APB’s revenues come, not from Tiger, but from products licenced from Heineken. And some licences are going to renewed soon: in Indon and Vietnam. So if F&N shareholders reject the sale of F&N’s share of APB to Heineken, and if Heineken cuts its nose to spite its face, APB is worth only S$36.7. Actually, this fact explains something I never understood: Tiger was not APB’s premier offering in a number of regional products; a Heineken product was. Now I know why: ang mohs (APB is managed by Heineken) clever to ensure that Heineken products have a presence.

So this is shumething the Thai bidder of F&N has to take into consideration given that he is geared to his eyeballs and beyond. He also has to take into account that APB could be delisted if the free float drops a little more. Co must have free float of at least 10% of shares.

All F&N shareholders also have to take into account that

— Heineken’s shareholders don’t want it to overpay for APB,

— Heineken has mgt control of APB, and

— even if Heineken withdraws its bid, it can take control of APB via arbitration and has the right of first refusal over F&N’s APB shares. F&N directors have said that in case of dispute over valuation, the mechanism is not related to its share price. So could get less.

My guess is that he will not try to block the sale at the coming EGM of F&N. He wants the cash and other assets of F&N (soft drinks?) in a break-up of F&N. But his offer of S$8.88 is too cheap. F&N closed yesterday at 8.97. Note F&N plans to return effectively S$2.12 a share if its shareholders approve the sale of APB shares.

  1. The Thais are generally deal makers (think WWII, they came out with minimal damage against the Japanese). They are not confrontational.

    Depending on which editorial one reads, one would claim clever Heineken victory, the other would claim the shrewd Thais. At of the day, just like any good deal, both likely to come out getting what they want.

    But one could have guessed the Thais would have likely supported the Dutch the moment the banks approved the loans.

  2. The Thais kept their cards open. The Dutch kept them closed all the while and were emotional about reining in Tiger, and therefore pushed to pay way higher than comparables. Ang moh not so smart…

  3. Will Kirin think $8.88 is too cheap? Kirin is in for a substantial gain since their purchase of F&N was done when it was just above $6.00. Leaving out ThaiBev, Kirin is the only substantial share holder at the moment apart from Prudential. Abedeen has sold their lots. Looks like no one has a significant voice to demand for more.

    • Well the undisturbed price of F&N was around 7.50 (make it *. Add the S$2.12 “dividend”. Has to bid 9.50 minimum for it to make sense for shareholder. For Kirin profit is “peanuts”. It paid Temasek a premium for non controlling stake.

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