ThaiBev on review for Moody's downgrade on F&N strategy
Moody's Investors Service maintains Thai Beverage's rating on review for downgrade, on a further twist concerning the company's takeover attempt for Fraser & Neave.
ThaiBev and associated company TCC Assets, which is also majority-owned by Charoen Sirivadhanabhakdi, are tendering for shares in F&N, only to face a counter-bid from Overseas Union Enterprise (OUE). TCC’s offer will end tomorrow.
On November 15, OUE offered to buy F&N for 13.1 billion Singapore dollars (Bt328 billion), or S$9.08 per share. The price is more than the S$8.88 per share, or S$8.8 billion, offered by ThaiBev and TCC. OUE also won Kirin Holdings’ support. Kirin will sell its 14.8-per-cent stake in F&N to OUE, while OUE in return will sell F&N’s food and beverage business to Kirin for S$2.7 billion.
OUE’s bid could lead to two possibilities: ThaiBev and TCC Assets may increase their offer for F&N to gain complete or partial control, or the companies may surrender their existing stake of 33.6 per cent, now worth more than S$4 billion.
“As many elements of this transaction are still evolving, there is limited clarity regarding the final impact on key credit metrics as well as on the company's financial position, growth strategy, and business composition,” Moody’s said in reference to ThaiBev, which is listed on the Singapore Exchange and has been so far a flagship business of Charoen’s empire.
ThaiBev and TCC have spent more than S$3.6 billion by raising debt to increase their stake in F&N to 33.6 per cent. ThaiBev’s leverage, as measured by debt to EBITDA (earnings before interest, taxes, depreciation and amortisation), increased to more than 4 times, a level materially higher than its historical levels of around 1 time.
Moody’s showed much concern on the strategic intent of Charoen and his wife Khunying Wanna, who have been orchestrating the takeover bid for F&N.
The rating review will be concluded after there is sufficient clarity on the strategic rationale of the F&N transaction and its impact on ThaiBev’s business composition and growth strategy, as well as clarity on the intention of ThaiBev’s controlling shareholders and their influence over the group’s strategic direction.
Moody’s has now assigned a “Baa2” rating to ThaiBev.
