Takeover an example for other companies
Kitipong Urapeepatanapong, chairman of Baker & McKenzie's Bangkok office, shares his views after Thai Beverage's acquisition of Fraser & Neave at Krungthep Turakij TV yesterday.
How do you see Thai businesses' overseas expansion after Thai Beverage's acquisition of Fraser & Neave?
This is a good example of ThaiBev's expansion abroad. The acquisition appears [to be part of] its business-expansion strategy. F&N's food business complements ThaiBev. F&N's beverage business is also in line with ThaiBev's owner, Charoen Sirivadhanabhakdi's family. It has spent a large amount of money for this company because of a number of competitors [vying for control of F&N]. It is a necessary strategy for a Thai company to penetrate the Asean market with its 600-million population.
According to The Wall Street Journal, an Indonesian bidder did not see the deal as attractive any more as it focused more on the property business in Singapore, and Singapore's government has come out with controls on property prices.
How many ways could ThaiBev expand its business after winning the F&N deal?
There are many food and beverage businesses. F&N captures a big market in Asean that could link to beer, liquor and other types of beverages. It could also strengthen Serm Suk's business in Thailand. There may be new products overseas.
The first possibility is to distribute Serm Suk products abroad. The second concerns the property business. As Charoen's group has joined with Singaporean businesses, property-business expansion and fund mobilisation could be made easier if there is an asset under the name of F&N.
Previously, we saw mergers among banks, and Thai companies' acquisition of energy businesses. Now, food and beverage companies are merged.
Will there be any change in the global trend for mergers and acquisitions?
There could be a lot of changes if the baht appreciates. Aside from the energy and petrochemical businesses, Thai companies have expertise in food, hotel and property businesses. Next we may see a Thai company acquire a hospital business abroad.
Amid the current appreciation of the baht, will we see more takeover deals?
It could happen. Any company that is considering a deal may do it faster. To any company that has not thought about it yet, if it has a large amount of cash in hand, it could have an opportunity. A deal may not be a 100-per-cent takeover. It might be a joint partnership in each country, depending on corporate strategy.
In the case of Charoen's group's acquisition of F&N, how does it become an example or a lesson for Thai companies' overseas expansion?
Certainly, the first issue is price. Don't underestimate competitors. A study is required for a price. Charoen said the price of US$17.6 million [Bt524 million] was not too high.
The second issue is the funding source. To my understanding, this deal is financed partly from borrowings.
The third issue is that there is no need for small and medium-sized enterprises to merge with listed companies abroad, despite their large market capitalisation or attractive business opportunities, because of extremely high costs. I think that an opportunity is essential, and we need to consider how much a Thai company can make [from a merger] and how the merger can complement the Thai business.