F&N prices soar as new bidder enters arena

The price of Fraser & Neave Ltd shares rose to a record in Singapore trading Friday after a S$13.1 billion (US$10.7 billion) takeover offer from a group led by Overseas Union Enterprise Ltd (OUE) escalated the bidding war for the 129-year-old property and beverages conglomerate.

F&N stock traded as high as S$9.36 late today and was set for its highest close. The OUE group yesterday offered S$9.08 a share, topping the S$8.88 offer by Charoen Sirivadhanabhakdi, Thailand’s richest man.

“I’d expect a better offer from Charoen,” said Justin Harper, a strategist at IG Markets in Singapore. 

“If OUE came in with S$9.50 a share or somewhere near S$10 a share, it might have warded Charoen out of the game. Charoen still has room to maneuver to increase his bid above OUE at the moment.”

Charoen has sought control of F&N since July when he agreed to buy a stake in the drinks and property company, touching off a race to buy its assets. OUE has enlisted Kirin Holdings Co (2503), Japan’s largest drinks maker and F&N’s second-largest shareholder, in its bid. OUE would get the company’s property business and Kirin would take the food and beverage unit.

“This is the first salvo from OUE, just to test how the other party will respond,” said Lim Jit Soon, Singapore-based analyst at Nomura Holdings Inc. “I expect like any other takeovers, this will lead to offers and counter offers.”

F&N rose 2.3% to S$9.34 at 2:57pm in Singapore. OUE, a Singapore-based property company, climbed 3.9% to S$2.64.

Heineken NV (HEIA) won control of F&N’s beer unit in a deal that closed on Thursday. The OUE offer is being made by a unit of Arbon Holdings Ltd., a company incorporated in the Cayman Islands and holf-owned by OUE.

The remaining 50% of Arbon is held by certain investment funds and accounts managed by Farallon Capital Management LLC and Noonday Global Management Ltd., alongside other investors.

Kirin Agreement

Kirin, which has a 14.8% stake in F&N, has agreed to tender its shares and won’t accept any competing bid, OUE said. The Japanese company is “aware of the announcement,” spokesman Kan Yamamoto said, declining to comment further.

The Japanese brewer, Asia’s biggest beverage maker, will offer S$2.7 billion, for F&N’s food and beverage business, according to OUE’s statement. Its stock dropped as much as 4.7% in Tokyo trading Friday.

“Investors are now worried,” Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo, said by telephone Friday, referring to Kirin’s role. “They’re concerned whether it will turn out to be expensive shopping without rewards.”

Break-up Fee

F&N said it had commited to pay the OUE consortium a break- up fee of as much as S$50 million if a competing offer is successful. F&N said it agreed to the fee to “create a competitive bid situation, thereby maximising value for shareholders.” The fee shouldn’t be seen as a recommendation by the board, it said.

“The idea of the break-up fee is to entice an interested buyer to step in,” said Professor Ang Ser Keng, senior lecturer of finance at the Singapore Management University. “By announcing this fee, it implicitly signals that F&N has a preferred bidder.”

Charoen has failed to win support from F&N’s board for his existing bid. An independent adviser has found Charoen’s offer “not compelling, though fair,” F&N’s board has said in a letter to shareholders. Charoen’s bid of S$8.88 a share is at the low end of the adviser’s estimates that value the company at S$8.30 to S$11.22 a share, the board said. F&N directors who hold shares don’t intend to accept the billionaire’s offer, the board said.

Charoen’s unlisted business, TCC Group, has a real estate unit. His Thai Beverage (THBEV) Plc, which sells the Chang brand of beer, gets almost all its revenue from its home market.

Related search: F&N, OUE, TCC, Charoen Sirivadhanabhakdi, Kirin, Heineken

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