Overseas Union-led group, Thais battle for control of F&N

SINGAPORE Fri Nov 16, 2012 12:46pm IST

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SINGAPORE (Reuters) - A group led by Singapore property firm Overseas Union Enterprise Ltd (OVES.SI) launched a S$13.1 billion ($10.7 billion) bid for Fraser and Neave Ltd (F&N) (FRNM.SI), challenging a takeover offer for the conglomerate from Thailand's third-richest man.

The counter-bid, if successful, could transform Overseas Union into Singapore's No.1 listed residential developer in the largest-ever M&A deal in Southeast Asia. The F&N board has yet to recommend the bid to shareholders, the biggest of which are firms linked to Thai billionaire Charoen Sirivadhanabhakdi including Thai Beverage PCL (TBEV.SI) and TCC Assets Ltd.

Charoen, looking to enlarge his property and beverage empire in Southeast Asia, is likely to raise his S$8.88-a-share offer in response to the S$9.08-a-share bid announced by Overseas Union on Thursday night, analysts said.

"OUE's offer is likely to be the first salvo in this fight," Jit Soon Lim, head of Southeast Asian equity research at Nomura, said in a note to clients. "TCC is likely to counter offer as it will want to defend its interest in the group."

Charoen is contending with one of the region's most powerful tycoons - Stephen Riady.

Riady is the chairman of Overseas Union as well as Hong Kong-listed Lippo Ltd (0226.HK), which owns a majority stake in the Singapore firm through its subsidiaries. He is also the president of Indonesia's Lippo group of companies founded by his father Mochtar Riady.

Overseas Union said in a statement on Thursday that it has secured conditional support from F&N's second-biggest shareholder Kirin Holdings Co Ltd (2503.T) to bolster its chances of victory.

Kirin, which owns around 14.8 percent of F&N, will offer to buy the conglomerate's food and beverage business if the consortium's bid was successful, according to Overseas Union. The Japanese brewer was not listed as part of the consortium in the statement.

BRIDGE LOANS

Overseas Union is bringing out the big guns to gain control of the 129-year-old F&N, which manages thousands of serviced resident apartments in cities like London, Paris and Dubai.

The conglomerate's S$8 billion property portfolio also includes retail malls, office towers and high-tech business parks in Singapore, Australia and Japan.

"All are good assets," Stephen Riady told Reuters on the sidelines of a conference on philanthropy held by Credit Suisse at the National University of Singapore on Friday.

They complement those owned by Overseas Union, he said.

Credit Suisse (CSGN.VX) and Bank of America Merrill Lynch are underwriting a bridge loan for the counter-bid, sources with knowledge of the matter said, while CIMB is also providing some financial support to Overseas Union.

The bridge loan will be around $8.5 billion to $10.5 billion in size, making it one of Asia's largest bridge financing deals, other sources familiar with the matter said, declining to be identified because they were not authorized to speak to the media on the subject.

The bridge loan will have a 12-month maturity, and the bulk of it will be repaid from the proceeds generated from the sale of F&N's beer, food and beverage businesses, the sources said.

Dutch beer giant Heineken NV (HEIN.AS) agreed in late September to buy F&N's stake in Tiger beer maker Asia Pacific Breweries Ltd (APB) APBB.SI for S$5.6 billion. Overseas Union said Kirin has agreed to acquire F&N's food and beverage business for S$2.7 billion if the counter-bid was successful.

The counter-bid was placed by a consortium that includes investment funds and accounts managed by Farallon Capital Management LLC and Noonday Global Management Ltd.

"These guys are prepared for the long-drawn (battle) unless the Thais give a knockout offer," a source with direct knowledge of the matter said about Overseas Union's bidding strategy.

Shares in Overseas Union rose 4.3 percent in Singapore trading on Friday, while F&N advanced more than 2 percent to S$9.33, indicating the stock market is expecting an even higher offer.

Shares in Kirin declined 3 percent in Tokyo.

CHAROEN TO FIGHT BACK

The S$9.08 counter-offer values the company near the middle of the S$11.9 billion-S$16.1 billion range estimated by F&N's independent financial adviser JP Morgan.

In an unusual move, F&N agreed to pay a break fee of as much as S$50 million to Overseas Union to create a competitive bidding environment to maximize value for shareholders, the Singapore conglomerate said in a statement early on Friday.

If recent history is any guide, Charoen is likely to put up a strong fight. Earlier this year, the Thai billionaire forced Heineken to raise its offer to get control of APB.

Charoen, through TCC Assets and Thai Beverage, made a $7.2 billion bid in September to purchase shares of F&N that he did not already own, valuing the Singapore conglomerate around S$12.8 billion.

The Thai group has a 33.6 percent stake in F&N and can acquire another 2.8 percent from shareholders who accepted its offer. The offer is conditional on the group obtaining majority control of F&N.

(Additional reporting by Prakash Chakravarti of LPC/IFR, Charmian Kok in SINGAPORE, Denny Thomas and Stephen Aldred in HONG KONG; Editing by John O'Callaghan and Ryan Woo)

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