Heineken this morning noted Fraser and Neave's (F&N's) announcement that the latter had received an unsolicited and conditional offer from Kindest Place Groups Limited (KPG) for F&N's direct 7.3% stake in Tiger Beer brand owner APB, in a S$55 per share offer worth up to S$1bn ($803,000).
KPG's move has been hailed as a shrewd one by financial analysts covering Heineken, one of whom told BeverageDaily.com, however, that it was difficult to work out the precise Thai motives, or whether they had the cash to buy F&N's whole stake in APB at a later date.
"I think this will get Heineken to pay more, or they will be some sort of concession bid or sweetener placed on the table. The most plausible scenario now is that Heineken overpays (and they've already around offered x18 EBITDA) or just accept ThaiBev as a partner and move on," the analyst said.
"I know Heineken's response to this has been 'well we're offering more' [in total, see below] but it's S$55 versus S$50, so this will force Heineken's hand again. I'd say F&N will look for something more."
Paying through the nose?
Heineken was caught between a "rock and a hard place", the analyst added: "APB is a good asset, but you're already paying more than AB InBev paid for Grupo Modelo. If you look at prices over the last decade, probably around x12 EBITDA is what you should be paying. Now we're in the high teens."
Owned by the son-in-law of Thailand's second-richest man, Chareon Sirivadhanabhakdi, KPG currently holds an 8.6% stake in APB; Sirivadhanabhaki himself is chairman and principle shareholder of ThaiBev, which owns a 24.1% stake in F&N.
KPG's move follows an announcement from F&N's board last Friday that it had agreed to recommend Heineken's July 20 offer for F&N's entire (direct and indirect) 39.7% effective stake in APB, and its 50% share on non-APB assets in Asia Pacific Investment for S$5.3bn.
Heineken insisted today that KPG's offer - which will lapse on August 16 -did not compare to its own, since it was only worth S$1bn to F&N, and said: "Heineken continues to believe that the Heineken offer represents compelling value for F&N's and APB's shareholders.
"Heineken continues its discussions with F&N in relation to the Heineken offer accepted by the board of F&N on 3 August 2012," it added.
The Dutch brewer noted that its offer was worth up to S$7.7bn, given that completion thereof would trigger a mandatory general offer (MGO) on Heineken's part for the balance of APB's shares, adding S$2.4bn to the value of any deal.
'Trouble and drag' of Western Europe
Stressing Heineken's keenness to seal the deal for APB, the analyst noted the Dutch firm's geographic vulnerability, with the firm facing what he described as "trouble and drag" of circa. 40% sales exposure in Western Europe, and a race for attractive emerging market assets.
"This deal would take Asia from being circa. 6% of group [sales] to 14-15%, that should boost the underlying growth rate of the group," he said.
"They [Heineken] need that, because I can't see western Europe getting better anytime soon, and the level of cost savings will slow from what we've seen over the last decade or so."
Heineken faced stiff competition elsewhere, he added: "AB InBev have just moved into Mexico, so it will probably get more competitive there. Nigeria has also been a great market for Heineken.
"Now SAB Miller are moving into what was, effectively, a cosy jaunt for 20 years between Diageo and Heineken."