Thai Beverage Plc (ThaiBev) remains on course for a downgrade review, says Moody's Investors Service.
The statement comes after TCC Assets Ltd, a vehicle controlled by the main shareholder of the billionaire Sirivadhanabhakdi family, last week announced its latest bid to acquire Fraser and Neave Ltd (F&N).
ThaiBev is rated Baa2 now.
"While TCC's offer for F&N does not have an immediate impact on ThaiBev's ratings, it raises additional uncertainty regarding the motivation of its controlling shareholder and its influence over the group's strategic direction," said Annalisa di Chiara, a vice-president and senior analyst at Moody's.
"There is also uncertainty related to ThaiBev's role in the overall strategy and its potential exposure to non-core businesses like real estate. These factors will also play a critical role in our assessment of the company's credit profile and the final rating outcome."
Last week, TCC announced it will make a mandatory conditional cash offer for all the issued and paid-up ordinary shares of F&N it does not already own directly or indirectly through ThaiBev.
TCC's bid totals US$7.2 billion in cash for the remaining 69.64% stake in F&N.
Under Singapore's merger and takeover laws, a bidder must make a mandatory offer for a company if it buys a 30% stake.
Hence, when TCC and ThaiBev' combined stake reached 30.36% last Thursday, it had to make an offer.
ThaiBev has said it will not incur additional debt or expend funds to acquire more F&N shares or make an additional offer, so TCC stepped forward to acquire the additional F&N shares and undertake the latest offer.
To date, ThaiBev has spent S$3.6 billion (90.6 billion baht) to acquire its own accumulated 28.9% stake in F&N, funded largely with debt.
ThaiBev's ratings were placed on review on July 19 after buying 22% of F&N, resulting in its higher leverage.
The review will focus on the company's plan to reduce leverage over the short term.
As well, the fate of Asia Pacific Breweries Ltd (APB), 40% owned by F&N and which remains a strategic asset underpinning the transaction, remains unclear.
F&N shareholders will vote on the proposed sale of the APB stake to Heineken (rated Baa1 stable) on Sept 28.
Neither ThaiBev nor TCC have indicated how they will vote at the shareholders' meeting.
"The outcome of the vote will play a critical role in our assessment of ThaiBev's future credit profile. Should Heineken's bid for APB be successful, we expect ThaiBev to use a portion of the sales proceeds to reduce debt on its balance sheet, which would be credit positive," said Ms Di Chiara.
However, ThaiBev's increased exposure to unrelated businesses may also imply new execution risks and a more aggressive risk tolerance by management and thus adversely affect its business risk profile _ a credit negative.
Moody's will consider TCC Asset's cooperation and partnership with ThaiBev in consolidating effective control of F&N and providing oversight of the real estate businesses.
The strategic fit of F&N's consumer beverage portfolio in the absence of APB, which owns the Tiger and Anchor beer brands, will also be assessed.
Ms Di Chiara said if Heineken's bid for APB is unsuccessful and F&N retains its current ownership of APB, then that will be positive for ThaiBev in terms of further revenue diversity and expansion opportunities through APB.
However, it may weaken ThaiBev's financial profile. There is no clarity at the moment regarding the key credit factors, she added.