Wednesday September 19, 2012
Mandatory offer for F&N unlikely
Mergers & acquisition premium warranted if bidding war for F&N Holdings emerges
PETALING JAYA: TCC Assets Ltd's proposed general offer for Fraser & Neave Ltd (F&N) for US$7.16bil (RM22.2bil) is unlikely to automatically result in a mandatory general offer for Fraser & Neave Holdings Bhd (F&N Holdings), according to CIMB Research.
The research house thus maintains its “underperform” call on the stock.
“F&N Holdings' earnings could remain under pressure this year from lower soft drinks volume and a slow-growing Malaysian dairy business. However, if a bidding war for F&N Holdings emerges, a mergers & acquisition premium is warranted and it could trade up to 26 times price-earnings ratio, which is what its closest peer Nestle (M) Bhd is trading,” said CIMB Research.
Previously, there were news reports that said Japan-based Kirin Holdings Ltd and Coca-Cola were among the interested parties looking to buy F&N Holdings.
CIMB Research believes that a successful mandatory general offer (MGO) for F&N is unlikely to lead to a downstream MGO on F&N Holdings because the former is not deemed to have a significant degree of influence over the latter as its earnings or assets contribute less than 50% to F&N.
“If there is no direct general offer for F&N Holdings, the soft drinks division would still need to take time to replace the vacuum left by Coca-Cola,” said CIMB Research.
To recap, TCC Assets Ltd, a related party of Thai Beverage Pcl (Thai Bev), made a MGO for F&N, which is F&N Holdings' parent company, at S$8.88 (RM22.20) a share or US$7.16bil for the remaining 69.7% stake it does not own.
CIMB Research said that it was unlikely that a successful MGO for F&N would lead to a MGO for the Malaysian unit.
This is because, under the Malaysian Code on Take-Overs and Mergers, a mandatory offer applies to a person who has obtained control in an upstream entity which holds more than 33% of the downstream entity with the upstream entity having a significant degree of influence over the downstream company.
“In this case, the upstream entity (F&N) is not deemed to have a significant degree of control over the downstream company (F&N Holdings) because the value of the latter does not exceed more than 50% of the assets, NTA (net tangible assets), market cap, shareholders' funds, sales or earnings of F&N,” said CIMB Research.
F&N has scheduled a shareholder vote on Sept 28 to approve the sale of a 40% stake in Asia Pacific Breweries Ltd (APB) to Heineken NV. ThaiBev is F&N's biggest shareholder with a 30% stake, followed by Kirin with a 15% stake.
In the last two months, Thai Bev and Heineken have battled for control of APB, the maker of Tiger beer. The winner was Heineken, and F&N agreed to sell its 40% stake in APB to the Dutch brewer for US$6.3bil.
The deal requires approval from F&N shareholders.
F&N has scheduled a shareholder vote on Sept 28 to approve the sale of a 40% stake in APB to Heineken.
However, Thai billionaire Charoen Sirivadhanabhakdi's move to launch a US$7.2bil offer to buy out other shareholders of F&N Ltd, may now derail Heineken's bid to take full control of F&N's prized beer business.
Charoen holds his stake in F&N through Thai Bev. He is launching the takeover of F&N through TCC Assets Ltd.
Market watchers said that Charoen's move to take over F&N before the key F&N shareholder meeting on Sept 28 had now raised doubts on whether the sale of F&N's 40% stake in APB was a done deal.