F&N shareholders approve sale of stake in APB to Heineken

The shareholders yesterday approved the sale of F&N’s direct and indirect interests in Asia Pacific Breweries (APB) to Heineken for 5.6 billion Singapore dollars (Bt140.65 billion). The transaction, subject to regulatory approval from authorities in Singapore and New Zealand, is expected to be complete in November.
While this resolution ends the beer war between Thai billionaire Charoen Sirivadhanabhakdi – who holds majority stakes in ThaiBev and TCC Assets – and Heineken, his move against F&N’s distribution of dividends surprised other shareholders, who include Kirin Holdings.
ThaiBev and TCC Assets vetoed the distribution of S$4 billion in capital gains from the share sale. Making up the largest single shareholder, together they have great influence over the use of proceeds from the APB divestment. The proceeds could be used to grow F&N’s business, or as distributions that benefit ThaiBev and TCC Assets.
“There’s still that cloud of uncertainty for shareholders,” said Justin Harper, Singapore-based market strategist at IG Markets, referring to F&N investors. “Should they sell their shares now or wait to see what the Thais have in store for F&N going forward?” he told Bloomberg.
Last week’s announcement by Charoen’s camp that it would support Heineken’s offer for APB has spurred speculation that he will break up F&N.
Without APB, the brewer of Tiger beer, F&N is left with the property and food/beverage businesses. F&N is the leader in the soft-drinks markets in Singapore and Malaysia, with 24.5-per-cent and 26.9-per-cent market shares respectively, according to Euromonitor. But F&N’s reach in the rest of the region is weak and its Asia-Pacific market share is only 0.3 per cent.
F&N’s property portfolio, worth more than S$8 billion, has also attracted the interest of Blackstone Group LP and global property companies, sources have told Reuters, while the beverage business could appeal to potential suitors such as Coca-Cola Co.
“After the sale of the brewery business, what’s left are the beverage and property businesses,” said Ng Soo Nam, Singapore-based chief investment officer at Nikko Asset Management.  “Those are probably interesting assets to the ThaiBev group. This could be part of their geographic diversification.”
In a statement released after the shareholder meeting yesterday, F&N chairman Lee Hsien Yang expressed his gratitude to F&N shareholders for their overwhelming support of the board’s recommendation to sell the group’s direct and indirect interests in APB to Heineken. He said the sale at a very attractive valuation allowed F&N immediately to monetise a substantial value of its beer interests and maximised overall returns to shareholders.
“As the proposed capital reduction did not receive sufficient support, the board will consider all options available to distribute a portion of the sale proceeds as soon as practicable, after the completion of the APB sale,” he said.
While F&N reaped huge returns, Heineken would also see a significant increase in its exposure to emerging markets, establishing itself as the brewer with the most diversified emerging-markets footprint. Based on 2011 pro forma figures, emerging markets would account for 62 per cent of consolidated beer volume and 55 per cent of its EBIT (earnings before interest and taxation), against 59 per cent and 50 per cent respectively.
“APB will provide Heineken direct access to two of the most exciting emerging markets in the world: Southeast Asia and the Pacific Islands and China,” Heineken said in a statement. “Southeast Asia and the Pacific Islands is a growing, dynamic region of over 600 million people with favourable demographics, strong economic development and a fast-growing beer market.”