Thai billionaire grabs advantage in APB tussle

 

 

 

 

 

 

 

 

 

 

 

 

 

The same tactic is often used in the corporate world when a company wants to swallow up its rival - often by acquiring large chunks of its shares within a short span of time.

 

Last month, OCBC and its insurer affiliate Great Eastern Holdings announced that they had a mystery buyer for their combined stakes in Fraser & Neave (F&N) and Asia Pacific Breweries (APB).

 

In line with this strategy of surprise, the deal was inked in two days - before another party could barge in with a counter offer.

 

The buyer for the F&N stake turned out to be Thai Beverage, the maker of Chang beer, which is controlled by Thai billionaire Charoen Sirivadhanabhakdi. At the same time, a company belonging to his son-in-law bought the APB stake which had been put up for sale.

 

But the two transactions failed to go down well with Heineken which has a 50-50 joint-venture with F&N, that in turn owns 64.8 per cent of APB.

 

It would not be surprising if the Dutch brewer saw Charoen's family's S$3.8 billion (US$3 million) purchases of sizeable stakes in F&N and APB as a brazen attempt to gain control of the fragmented Asian beer market using APB as its springboard.

 

Nor did it relish the prospect of the Thai billionaire or his nominees taking part in F&N's board meetings where APB's expansion plans might be discussed.

 

So two days after Thai Beverage's move on F&N, Heineken launched its own version of a first strike - making a S$5.1 billion bid for F&N's APB stake at S$50 a share - topping the S$45-a-share Mr Charoen's son-in-law paid for his APB stake.

 

But if anyone believes that the F&N board's acceptance of Heineken's offer - and agreement to put it to their shareholders - is the end of the story, he is sadly mistaken.

 

Time is of the essence if a pre-emptive strike is to succeed, but the cumbersome stock exchange rules mean that Heineken will have to wait at least a few more weeks before F&N can convene a shareholders' meeting, as it has to prepare the circular and send it out to shareholders.

 

Meanwhile, Charoen has been able to use the delay to seize the high ground. He has done so admirably in the past two weeks, as he slowly erodes Heineken's first strike advantage.

 

First, the water was muddied with the company of Charoen's son-in-law offering an even higher price of S$55 a share for the direct 7.3 per cent stake in APB owned by F&N - with a deadline that was set to expire tomorrow, but has now been extended by another week.

 

And even though OCBC and affiliated parties have given Thai Beverage until October to complete the transaction, it moved swiftly to conclude the purchase yesterday - after getting a conditional waiver from the Singapore Exchange to convene its own shareholders' meeting to approve the purchase.

 

In the meantime, Charoen has flagged his determination to strengthen his hold over his new trophy by acquiring more shares in F&N to raise his stake in the beverage giant to 26.2 per cent.

 

This puts him in an enviable position of being able to block F&N's sale of its APB stake to Heineken at the shareholders' meeting, as Thai Beverage's holdings are almost twice as large as the next biggest shareholder, Kirin Holdings, with a 14.97 per cent stake.

 

It leaves Heineken with three options. It can offer a higher price for APB and hope that Charoen will bite, or stick to the status quo and have its rivals holding substantial stakes in APB.

 

The third option is to "go nuclear" and walk away from APB, taking the Heineken brand with it, as some analysts suggest. But it would be unwise, as Heineken will have to start from ground zero in Asia. It will leave Charoen with a free hand to use the well-known Tiger Beer brand to build an Asian brewery empire.