Coke move for F&N beverage arm would ‘make sense’ after Heineken shake up: analyst

By Ben Bouckley

- Last updated on GMT

Related tags Heineken Coca-cola

Picture Copyright: The Coca-Cola Company
Picture Copyright: The Coca-Cola Company
A Singapore-based analyst tells that rumours of a Coca-Cola Company move for Fraser & Neave’s (F&N’s) non-alcoholic beverage business would be ‘no surprise’, as Heineken chases down its brewing arm APB.

F&N’s 2011 accounts show that its separate soft drinks business, F&N Holding Bhd. (key brand are F&N Fun Flavors and 100Plus, pictured below) turned over S$759m (US $608.9m) last year, with EBIT up 38% to S$113m, and is particularly strong in Malaysia and Singapore.

100 Plus

Heineken launched a takeover offer for F&N's jewel in the crown, Asia Pacific Beverages (APB), which could be worth up to S$7.5bn on July 20, but last Monday agreed a deadline extension with F&N’s board regarding its response.

With this set to expire tomorrow, F&N today suspended trading in its shares pending an announcement.

Heineken spokesman John Clark refused to comment on rumors that F&N was holding out for a higher price, but told this morning his firm had noted the share suspension, and anticipated an imminent F&N announcement.

"That's our expectation, whether it's tomorrow or something happens this evening. We don't know,"​ he said.

Heineken launched its bid after regional rival Thai Bev sealed a deal on July 18 to up its stake in F&N to 22%, while a company affiliated to its owner bought 9% of APB.

APB operates 24 breweries in 14 counties across Southeast Asia, and produces and sells over 40 beer brands including Anchor, Tiger, Bintang and Heineken itself.

Fraser & Neave chases higher price?

We asked Ng Kian Teck, lead analyst at Singapore-based SIAS research what he thought would happen by the deadline. Would F&N simply accept Heineken’s S$50 p/share offer, or hold out for more money?

“F&N will definitely want a high price. But the point is that it depends on the IFA recommendation to the board of directors, who will then make a recommendation to shareholders,”​ Teck told

“Looking at the price Heineken has offered, it is quite hard for the IFA to actually justify a higher price or to reject Heineken’s offer. But from F&N’s side I think they are obviously looking at whether it is possible to up the valuation or the offer from Heineken.

On Friday the world would see whether they have able to persuade Heineken to up the offer, Teck said. If not, then F&N would probably be more keen to accept Heineken’s existing offer.

Coke interest ‘no surprise’

The analyst agreed that Heineken was keen to do a deal, given the extent to which taking over APB, which analyst suggest could transform its growth rates in Asia overnight, from 6-15%.

“Heineken wants to own a group in Asia itself. They want to retain their strength and presence in this region. Because the beer market is a big opportunity. This is the reason why they have been quite aggressive – coming in with a higher offer.”

If Heineken pulled-off the deal, it would most likely have wider beverage industry implications, with Bloomberg quoting sources ‘familiar with the matter’ today claiming that Coca-Cola and Kirin could go toe-to-toe in a fight to acquire F&N non-alcoholic beverage and dairy business, F&N Holding Bhd.

“If F&N were to sell off the APB business, then why wouldn’t F&N be open to offers for other divisions? So I wouldn’t be surprised if Coca-Cola or another beverage company comes in with an offer," ​Teck said.

He agreed that, since Japan’s Kirin Holdings might lose out to Heineken with APB, it was possible it might regard F&N’s non-alcoholic beverage business (which includes soft drinks, RTD teas and waters, and operates alongside a S$1.67bn dairy business) as a consolation prize.

Teck said: “The problem for Kirin is that their balance sheet is weaker [than Heineken’s]. But on the beverage business – they can probably dig a way out to purchase this. Of course, that depends on Coca-Cola, which is obviously much bigger. But a lot depends on possible synergies between companies.”

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