Heineken may have to pay extra to control Tiger Beer maker

SINGAPORE: With a deadline imminent, Heineken may be under pressure to sweeten its $4.1 billion offer to Fraser and Neave
(F&N) to win control of Tiger Beer and 24 Asian breweries -- a deal
that could lift the Dutch brewer's profits and break apart the
Singapore drinks and property group.
Heineken, which already
owns 42 percent of the prized Asia Pacific Breweries (APB), wants
F&N's 40 percent stake as part of a general offer to defend its
territory against advances by Thailand's second-richest man.
The
world's third-largest brewer extended its offer of S$50 per APB share
until this Friday, fuelling speculation that F&N was haggling with
Heineken over the price.
"We are waiting for F&N to give a
response to our offer," a Heineken spokesman said, adding that the
deadline was 6 p.m. in Singapore and noon in Amsterdam (1000 GMT).
The
deal is vital for Heineken in the fast-expanding Asian market. Control
of APB may raise the proportion of profits it gets from Asia to 15
percent from 6 percent, European analysts said, boosting the growth
rate of the whole group.
"My reading is Heineken will go all out
to win," said Goh Han Peng, an analyst at DMG & Partners
Securities. "APB's current valuation looks high, but if you look at the
nature of their business and the growth potential it's considerably
worthwhile to pay so much."
Goh said Heineken could raise its
offer to as much as S$60 per share, which would be a premium of more
than 20 percent to APB's last traded price.
Sources said
Coca-Cola is keeping a keen eye on F&N's other lines -- which
include the popular soft-drink 100PLUS, fruit juices, mineral water and
dairy products -- in the event they are hived off from the Singapore
group's property assets.
That could pit Coca-Cola against two sizeable Asian brewers, Thai Beverage and Japan's Kirin Holdings, which have their own interests to protect as F&N's two largest shareholders.
Shares
of F&N and APB were suspended from trading on Thursday and Friday,
after sources told Reuters that F&N's board, whose chairman Lee Hsien Yang is the younger son of Singapore's elder statesman Lee Kuan Yew, was pushing Heineken to make a better offer.
BEER BATTLE
If
it wins APB, Heineken will get full ownership of Tiger, Bintang, Anchor
and other brands of beer plus two dozen breweries in 14 countries
including Singapore, Malaysia, Indonesia, Vietnam, Thailand and
Cambodia.
Heineken began brewing Tiger with F&N in the 1930s
but that long partnership hit the rocks after Thai Beverage and other
companies linked to Thai billionaire Charoen Sirivadhanabhakdi bought
stakes in F&N and APB for $3 billion last month.
The investment by Charoen, who wants to expand his own beer business in Asia, pushed Heineken into a general offer for APB.
If
F&N were to accept the $4.1 billion offer, Heineken would pay
minority shareholders about $2 billion. That amount would be higher if
it offers more to F&N.
Thai Beverage has raised its stake in F&N to 24.1 percent since its initial purchase, making it the biggest shareholder.
Kirin,
which owns 15 percent of F&N, was asked about its plans at a media
briefing on its first-half earnings on Friday, but President Senji Miyake gave little away.
"We
are carefully considering what action is best, so we don't have to
alter our (Southeast Asia) strategic growth plans," Miyake said,
repeating that Kirin was focused on F&N's soft drinks and was not
thinking about doing anything with APB.
COKE IS WATCHING
Coca-Cola,
the world's largest soft-drinks maker, is interested in a possible
opportunity to bid for F&N's beverage business but is waiting to
see how the Heineken bid plays out, sources familiar with the situation
told Reuters on Thursday.
A U.S.-based spokesman for Coca-Cola declined to comment.
Banking
sources say a bid by Coca-Cola for F&N's beverage business would be
possible only if F&N is broken apart and that Kirin could also be a
potential suitor.
Last year, F&N and Coca-Cola ended a
partnership under which F&N bottled and sold Coca-Cola's drinks in
Malaysia and Coca-Cola did the same for F&N in Singapore.
Most
of F&N's food and beverage business is locked up in its Malaysian
unit, whose shares rose 4.6 percent on Thursday on speculation about
Coca-Cola's interest and jumped as much as 5 percent on Friday.
Without
APB, F&N will rely heavily on property assets that include upscale
malls in Singapore and serviced apartments in various parts of the
world. In that case, Nomura Holdings
says, 80 percent of F&N's earnings would come from real estate,
with most of the rest from soft-drinks and a bit from publishing.
F&N
shares have jumped 31.5 percent this year to close at S$8.15 on
Wednesday, though off a record S$8.49. APB shares, which last traded at
S$49.50, have surged 71.9 percent since the start of the year. - Reuters