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Tuesday August 7, 2012

Likely threat for Carlsberg if Heineken manages to take over APB stake

By LIZ LEE
lizlee@thestar.com.my


PETALING JAYA: While the focus is mostly on Fraser & Neave Ltd's (F&N) likely break-up of operations from Heineken NV's proposed takeover of F&N's stake in Asia Pacific Breweries Ltd (APB), the brewery arena could see the deal outcome challenging Carlsberg Brewery Malaysia Bhd's business in Singapore.

After taking control of APB, Heineken could look into stepping up its game in the island-republic where social drinking is increasingly popular.

AmResearch analyst Low Soo Fang believes that if Heineken manages to acquire F&N, which brews Tiger, it would likely affect Carlsberg Malaysia more than Guinness Anchor Bhd (GAB) in the regional market.

“The Malaysian business would not be affected, but I think Heineken would more aggressively promote its brand in Singapore, which would affect Carlsberg Malaysia,” she said, pointing out that Carlsberg Malaysia owned Carlsberg Singapore.

“The impact would be more on Carlsberg's standing due to the potential increase in competition from Heineken.”

She added that the Singapore beer market was still fragmented although saturated with myriad brands.

As for GAB, Low said it would be “business as usual” because it was unlikely to have a significant impact on its Malaysian business.

Another analyst from a bank-backed brokerage echoed her take on the matter, saying that market watchers “need not bat an eyelid” at the stake acquisition.

She explained that Heineken's deal, from a global perspective, would be for the parent company to grow its earnings while its brewer and distributor here, GAB was focused mainly on the domestic market with only a small scale of exports.

“Of course, we may see some synergies between Heineken NV and GAB. It would not be significant in earnings but maybe in marketing and branding,” she said.

As for the beer industry in Malaysia, Low said that the deal would not shake things up either.

“APB will likely continue to adopt the strategies put in place by F&N and Heineken as it has been doing well in the past few years,” Low said.

She added: “Maybe APB would go for the larger-scale strategies considering Heineken is aiming for the larger Asia-Pacific market, which is the main reason for buying APB.”

Low noted that China could be an attractive market for brewers.

GAB is linked to APB through its major shareholder GAPL Pte Ltd which is the 50-50 joint venture company between Diageo PLC and APB.

Heineken proposed to acquire F&N's 40% stake in APB last month for US$4.1bil (RM12.8bil). It already has 42%.

The move was in response to protect its interest in APB after Thai businessman Charoen Sirivadhanabhakdi of Thai Beverage plc increased his stake from 22% to 24% via the open market.

If F&N shareholders, which include Chareon, accept the offer, analysts predict a break-up of F&N's operations could happen.

In the Singapore market, beer volume grew by 7% last year, according to consumer markets strategy researcher Euromonitor Intern-ational's report on the beer industry.

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