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Heineken Joins Tussle for APB, Kirin May Join the Bidding War

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by Donavan Lim, Ernie Calucag

In response to Thai Beverage’s surprise bid for Asia-Pacific Breweries (APB), one of the biggest Asia-Pacific breweries, Heineken N. V. has thrown its hat into the arena with a counter offer.

The Dutch brewer is seeking to acquire all Fraser & Neave (F&N)’s direct and indirect interests in Asia Pacific Breweries Limited  at a price of S$50 per APB share or a total consideration of S$5.1 billion, surpassing the S$45 apiece offer proposed by companies linked to Thai tycoon Charoen Sirivadhanabhakdi.

Further, Heineken has also offered S$163 million for F&N’s interest in the non-APB assets held by Asia Pacific Investment Private Ltd, a 50/50 joint venture between Heineken and F&N.

F&N owns 40 per cent of APB, maker of the popular Tiger beer.

The S$50 per share offer is 19 per cent above APB’s Thursday closing price of S$42.0.

Commenting on the offer, Heineken Chairman and Chief Executive Officer Jean-François van Boxmeer said: “We really value our partnership with F&N which goes back over 80 years, but due to changes in the F&N and APB shareholding, the fabric of the partnership has changed. As a result, it is time for us to look ahead to the next chapter of our Asian business, in which Singapore will continue to be our regional headquarters and both the Heineken and Tiger brand will spearhead our brand portfolio in Asia.”

“We believe that our offer for the APB shares is highly attractive and provides excellent value to F&N and APB shareholders. At the same time, taking control of APB will create long-term financial and strategic value for Heineken’s shareholder.”

Besides the Tiger Beer brand, APB owns the rights to brew Bintang beer in Indonesia, Anchor in China, Southeast Asia and Sri Lanka.

Given Asia’s increasing importance to Heineken, analysts said the brewer could not afford to allow APB to slip into the control of another party.

“We believe the latest offer by Heineken is a pre-emptive move to recent shareholding changes at F&N and APB, with long-time shareholders OCBC and GE selling their stakes in both companies to a competing brewery player, Thai Bev, controlled by the Thai-based

TCC Group. APB is strategically important to Heineken given its market leadership positions in high-growth markets in Indo-China and Southeast Asia, and has a close working relationship with Heineken through licensing agreements, where it brews and distributes Heineken beers in some Asian markets,” said Goh Han Peng, analyst at OSK-DMG.

In agreement, Hugh Young, a Singapore-based managing director at Aberdeen Asset Management Asia Ltd, said APB would fit better with Heineken’s assets than in Charoen’s Thai Bev empire.

Three-way Fight?

Some analysts believe, however, that this battle for APB’s control may drag on further.

Justin Harper of IG Markets, for one, went a bit further by suggesting it may end up as three-way bidding war, with Japanese brewer Kirin joining the fray.

“We could now see the Thais up their bid as a result of Heineken’s surprise move or even witness Kirin Holdings getting involved in a three-way tussle,” he said.

“Kirin already owns a stake of APB via its 15 per cent holding in Fraser & Neave, which holds 40 per cent of APB’s stock. This bidding war may get messy but it shows just how valuable APB is viewed.”

The brewing industry worldwide has been undergoing a consolidation phase.

Earlier, Anheuser-Busch InBev NV, the world’s biggest brewer, inked an agreement buy the remainder of Mexico’s Grupo Modelo SAB for US$20.1 billion in cash.

The offer by Heineken is subject to F&N shareholders’ approval of the deal.

However, in a statement after the close of markets on Friday, F&N said its board is considering Heineken’s offer.

“The board is considering the offer from Heineken, which remains open for acceptance until 27 July 2012. There is no certainty that any transaction or agreement will be entered into as at the time of this announcement,” it said.

Credit Suisse and Citigroup are advising Heineken.

Fraser & Neave suspended its shares on Friday.