SINGAPORE/HONG KONG Thai Beverage PCL (TBEV.SI) is working with a partner on a potential bid for Fraser and Neave Ltd (F&N) (FRNM.SI) to get its hands on the Singapore company's property and soft drinks businesses after Heineken NV (HEIN.AS) took pole position in the battle to buy F&N's prized beer brewer.
For two months, ThaiBev and Heineken fought for control of Asia Pacific Breweries Ltd (APB) APBB.SI, the maker of Tiger beer. Eventually, Heineken sweetened its offer to $6.3 billion and won over F&N, which agreed to sell its APB stake to the Dutch brewer.
The deal requires approval from F&N shareholders, including ThaiBev. Should the Thai group gain control of F&N, it could potentially block the transaction.
However, sources with knowledge of ThaiBev's plans say the group is shifting its focus to F&N because it would reap a handsome windfall from the improved Heineken deal and could profit from the possible break-up of F&N's other assets, including one of Asia's biggest real estate portfolios.
"A party acting in concert with the company is exploring the possibility of making an offer for F&N," ThaiBev, controlled by billionaire Charoen Sirivadhanabhakdi, said in a filing on the Singapore Exchange on Tuesday. It did not identify the partner.
Andrew Holland, beverage analyst at Societe Generale in London, said Heineken's position was now looking strong, with a generous offer and the possibility of withdrawing Heineken brand beer from APB if the bid failed.
"That's 30 percent of APB's volumes and around 50 percent of the profits would disappear. APB would be a pale shadow of what ThaiBev thought it was buying," he said.
Based on its 29 percent stake in F&N, ThaiBev stands to gain S$1.16 billion ($940 million) from Heineken buying APB. It will receive more if it takes over the Singapore conglomerate. Furthermore, any move to block the Heineken deal will force the Dutch brewer to walk away, putting the shares of both F&N and APB under pressure.
Heineken declined to comment on ThaiBev's latest move.
F&N has scheduled a September 28 shareholder vote on the sale of a 40 percent stake in APB to Heineken. ThaiBev is F&N's biggest shareholder, followed by Japan's Kirin Holdings Ltd (2503.T), which has nearly 15 percent.
A source familiar with ThaiBev's plans told Reuters that Charoen is now taking steps to ensure that his group is in a strong position to influence the outcome of the potential break-up of F&N after extracting a higher offer from Heineken.
ThaiBev has spent S$3.6 billion to build its stake in F&N to 29 percent. The purchase includes a block of F&N shares that it acquired from Singapore's OCBC group at S$8.88 each.
F&N shares closed 1.3 percent higher at S$8.66 on Tuesday.
ThaiBev's "holding announcement" did not state whether the partner was a member of Charoen's TCC Group or an unrelated company. A source with direct knowledge of the deal said the partner was within Charoen's family.
Kindest Place, owned by his son-in-law, has an 8.6 percent stake in APB.
Analysts have speculated previously that Charoen may try to bring in a partner to buy part of F&N's large property holdings.
F&N's property portfolio, worth more than S$8 billion, as well as its beverage business could be of interest to Charoen, analysts said previously. But Thailand's third-richest man would still need a partner to bid for those assets.
"We believe ThaiBev would be stretched financially to make a sole bid for F&N, hence the potential joint offer with another party," said Goh Han Peng, an analyst at DMG & Partners Securities.
Blackstone Group (BX.N) and other global property companies have also had a look at F&N's property business, sources previously told Reuters, while F&N's beverage business has attracted suitors including Coca-Cola (KO.N) and Kirin Holdings.
Besides market-leading positions in soft drinks and dairies in Singapore, Malaysia and Thailand, F&N also has distribution reach in emerging markets such as Vietnam and Myanmar, according to a DMG report.
ThaiBev said it has been in talks with banks to refinance a loan taken out to fund its initial stake purchase in F&N. Under Singapore law, it would be required to bid for all of F&N if its holding rose to 30 percent.
Basis Point, citing banking sources, reported on Monday that ThaiBev was seeking proposals for a loan of about S$9 billion and had contacted several lenders, including Singapore, Malaysian and Japanese banks.
Analysts have cautioned against discounting Charoen, who is known as a dogged fighter. The billionaire is estimated by Forbes to be worth $6.2 billion.
In the past Charoen has consistently shown a "willingness to take risks and face down competitors," said Mykolas Rambus, CEO of Singapore-based consultancy Wealth-X.
(Additional reporting by Prakash Chakravarti, Stephen Aldred, Alex McMillan and Denny Thomas in HONG KONG, Saeed Azhar and Kevin Lim in SINGAPORE, Khettiya Jittapong in BANGKOK and Phil Blenkinsop in BRUSSELS; Editing by Ryan Woo and David Goodman)