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Acquisition

ThaiBev invests in F&B giant

A 22-per-cent holding in the Singapore-listed firm will make it a global food and beverage firm

Thai Beverage has entered into an agreement to acquire a 22-per-cent stake in Fraser and Neave for US$2.2 billion (Bt69.43 billion), a move that worries rating agencies but will immediately turn it into a global food and beverage company.

In terms of value, at 2.8 billion Singapore dollars (US$2.2 billion), ThaiBev's deal is among the highest in overseas acquisition deals. Banpu, in 2010, spent $2.4 billion for a 100-per-cent stake in Australia's Centennial Coal, while PTT Exploration and Production paid $2.28 billion for a 40-per-cent interest in the Kai Kos Dehseh Oil Sands Project (KKD) in Canada.

The deal value accounts for 32 per cent of ThaiBev's market capitalisation of approximately S$8.623 billion or Bt217.3 billion. It is considered the biggest-ever investment by the largest Thai beverage company, which was founded and is majority-owned by Charoen Sirivadhanabhakdi.

With operations in 30 countries and a long list of food and non-alcoholic beverages, F&N is considered a high-value asset. Strategically, its 40-per-cent investment in Asia Pacific Breweries (APB), a joint venture with Heineken International, would also enhance ThaiBev's range of alcoholic products as APB currently controls 30 breweries in 12 countries in the Asia-Pacific region, selling over 120 brands of beer and beer variants.

"The proposed investment is a logical step to fulfilling the company's vision to be a leading global beverage producer and distributor with commercial excellence, product premium and professionalism. An investment in F&N is highly complementary to the company's existing capabilities and institutional knowledge in non-alcoholic and alcoholic beverage production and distribution, and will significantly increase the company’s profile in the food and beverage sector," ThaiBev said in a statement.

F&N is the largest beverage company in Malaysia and Singapore with a presence in over 30 countries. It also holds a strategic investment in Asia Pacific Breweries, a local bottler of Heineken beer and the maker of Tiger beer. ThaiBev noted that the investment immediately diversifies the company geographically and is highly complementary to the company's existing single market focus and will also enable exposure to high-growth Southeast Asian markets with attractive demographics and consumer spending trends.

Aside from comprehensive portfolios of renowned brands across multiple product classes, F&N, which has operated for more than 80 years in Southeast Asia, is considered a high-quality business.

According to Bloomberg, the price for F&N at S$8.88 is a 12-per-cent premium over Wednesday's close of S$7.96 in Singapore. ThaiBev will buy shares from Overseas-Chinese Banking Corp (OCBC), Singapore's second-biggest bank, and Great Eastern holds 18.2 per cent of Fraser and Neave and 7.92 per cent of Asia Pacific Breweries.

In the statement, ThaiBev also said that Kindest Place Groups, a company owned by Charoen's son-in-law Chotiphat Bijananda, will subsequently buy more shares in F&N and APB from the two sellers. It said further purchases would subject it to financial constraints.

Moody's Investors Service and Standard & Poor's Ratings Service yesterday issued statements showing concern about the financial cost. Both place ThaiBev's rating under review, with negative implications due to the high cost. ThaiBev plans to finance the transactions through a mixture of external borrowings and internal funds.


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