Hunt for Tiger intensifies

24 July 2012
Conrad Raj conrad@mediacorp.com.sg

A sale of Oversea-Chinese Banking Corp (OCBC) group's stakes in Fraser & Neave (F&N) and Asia Pacific Breweries (APB) - now put in play - probably would not have taken place under its former chairman Tan Chin Tuan.

The late Mr Tan, an icon of local banking, hardly sold any of his blue chips - Straits Trading, Robinson & Co, United Engineers, F&N and APB, among others. Most of these assets are now gone, thanks to limits on stakes in non-banking assets imposed on banks by regulators.

Perhaps the S$45 per APB share that Thai Beverage founder and controlling shareholder Charoen Sirivadhanabhakdi - through his son-in-law's Kindest Place - is paying, or the S$50 a share that Dutch brewer Heineken is offering would have enticed Mr Tan to part with his bank's shares, considering his historical cost was only 16 cents a share.

Now, with the maker of Tiger Beer the subject of a bidding war, many Singaporeans are lamenting the possibility of yet another local icon going the way of Raffles Hotel and landing in the hands of a foreign party.

But is that really the case? More than 80 years ago, it was the joint venture between Heineken and Malayan Breweries - the predecessor of APB - that led to the development of Tiger, now one of the best known beer brands in this part of the world. Heineken appears to have retained most of the brands it has bought in recent years, and its chairman and chief executive Jean-Francois van Boxmeer has promised to continue to promote Tiger in Asia.

Mr van Boxmeer said on Friday: "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 brands will spearhead our brand portfolio in Asia."

As for OCBC, it is strange that the banking giant did not seek competing offers for the APB shares it foisted on Thai Beverage. Wouldn't that have been more in the interest of its shareholders?

For sure, it may have wanted another party other than Heineken to have the shares to prevent F&N, which has a near 40-per-cent stake in APB, from losing control of the local brewer.

We do not know if the deal between OCBC and Kindest has been finalised. If it has, Kindest stands to make a quick S$110 million if Heineken's offer to buy up F&N's stake in APB goes through and a mandatory general offer is made.

Some observers are also questioning Thai Beverage's placing of the APB shares with Kindest on the grounds that it does not have the resources to buy both the OCBC group's - including Lee Rubber's - 22-per-cent stake in F&N and the 8.4-per-cent stake in APB.

After all, in stating its rationale for the purchase of the F&N shares, Thai Beverage said: "An investment in F&N is highly complementary to the company's existing capabilities and institutional knowledge in non-alcoholic and alcoholic beverage production and distribution, and will significantly increase the company's profile in the food and beverage sector."

So why place the crown jewel, APB, in a non-listed entity? Is this fair to Singapore-listed Thai Beverage's shareholders?

Singapore investment giant Temasek Holdings had already ruffled Heineken's feathers a couple of years ago when it sold its 14.7-per-cent stake in F&N to Japanese brewer Kirin. Dow Jones Newswires yesterday reported people familiar with the negotiations saying that Kirin was in discussions with bankers for a potential bid for APB in a move that would intensify the battle for control for the local brewer.

And, with Kindest, Heineken has another competitor and one with a direct stake in APB.
Heineken, the world's third-largest beer maker, surely will not want to share with rivals its plans for Asia, which now accounts for only 1.3 per cent of its ?17.1 billion (S$26.1 billion) in revenue but which is rapidly growing. Otherwise, why would it pay a staggering S$7.7 billion to take APB private?

For now, minority shareholders of APB are feeling quite a bit richer. APB shares hit a record high of S$49.50 each, up 17.9 per cent, before closing yesterday at S$48.49, or up 15.5 per cent. Meanwhile, F&N shares rose 4.2 per cent to close at S$7.92 after hitting a high of S$8.07, or up 6.2 per cent.

Conrad Raj is TODAY's Editor-at-Large.