Charoen has 'upper hand' with F&N bid

Charoen has been competing with investors led by Overseas Union Enterprise Ltd, which on Nov 15 bid S$9.08 a share. Charoen’s offer tops his rival but was slightly lower than the stock’s close on Friday, which was S$9.58.

Charoen and OUE had been given till yesterday to show they were willing to revise their proposals in which case Singapore’s Securities Industry Council would have ordered an unprecedented auction of F&N. The 130-year-old conglomerate has businesses ranging from soft-drinks to apartment buildings across Southeast Asia.

OUE is controlled by Indonesia’s Lippo Group, the founder of which is Indonesian tycoon Mochtar Riady. His son Stephen is executive chairman of OUE.

Auction Process

AFP reported on Saturday that the higher offer from Charoen is unlikely to derail the auction scheduled to commence today unless one party withdraws its bid. Both parties will still be able to table fresh bids, with OUE now under pressure to top Charoen.

Under the auction rules set by SIC, a daily bidding process will take place from today until one party gives up.

If one or the other indicates its proposal is final, the deal will be decided through a shareholder vote.

Charoen’s companies have a 34 per cent stake in F&N, while OUE has the backing of Kirin Holdings Co’s 15 per cent holding.

If either group wishes to raise its offer after today, it must submit the bid to the SIC. The rival will have time to respond.

At the end of the auction, the Charoen and OUE groups would have made their final offers, the regulator said in a statement.

"F&N shareholders would then be able to decide which offer to accept or none at all," it said.

But a regulator-directed auction is unprecedented, Singapore’s daily Business Times has said.

Charoen agreed to buy a 22 per cent stake in F&N in July, setting off a fight for the company’s soft drink and property assets and prompting the sale of its beer unit to Heineken NV.

Upper Hand

Charoen was seen to have the upper hand even before he raised his offer for F&N. Ang Ser-Keng, a senior lecturer of finance at the Singapore Management University told Bloomberg: "The Thais with their existing shareholding, called a toehold, has an upper hand. As a bidder with a substantial shareholding, you can afford to bid more aggressively given you already own significant number of shares."

Charoen’s latest offer values F&N at S$13.75 billion, over OUE’s bid worth S$13.1 billion.

OUE, a Singapore-based property company, has teamed with Kirin Holdings Co, Japan’s largest drinks maker, in its bid.

OUE would get the company’s property business and Kirin would take the food and beverage unit.