Shares of Singapore-listed beverage and property group Fraser and Neave rose over 4 percent on Monday, boosted by news that the company’s board is considering Heineken’s offer for its stake in Asia Pacific Breweries (APB).
The Dutch brewer last week launched a bid to pay S$50 ($40) a share for FN’s
[FRNM.SI
Loading…
()
], 40 percent stake in APB
[APBB.SI
Loading…
()
] – one of Southeast Asia’s biggest brewers. Heineken currently has a 42 percent stake in SGX-listed APB, which ended the trading day at S$48.50.
The prospect of a stake sale has prompted Nomura to raise its 12-month target price for FN from S$8.08 to S$9.16 – marking a 15 percent upside from current levels.
If FN accepts Heineken’s offer, it will reap cash proceeds of about S$5.2 billion, says Nomura analyst Jit Soon Lim, adding that cash from the sale would likely be paid back to shareholders in the form of a special dividend.
Lim, who has a neutral call on the stock, however, notes that if the sale were to go through, FN would also lose an important driver of its earnings. APB, which is also listed in Singapore, contributed almost 40 percent to FN’s earnings in the first-half of 2012.
While FN would be armed with a lot of cash, he says it will be difficult for the conglomerate to acquire other assets in the food and beverage (FB) space, due to the scarcity of assets available for sale.
Tussle in the Offing?
Lim adds if FN agrees to sell its stake in APB, it could spur a breakup of the conglomerate, which in addition to FB, operates property and publishing businesses.
Without APB, FN would have a much smaller FB business with a net profit base of about $80 million, Lim said.
Japanese drink maker Kirin and Thai Beverage have a 15 percent and 22 percent stake in FN, respectively. Thai Beverage last week bought OCBC and its insurance arm Great Eastern Holdings’ 22 percent stake in FN.
“Kirin and or Thai Bev may push for a demerger of the property business so the businesses can be valued separately and control for the FB and property assets settled accordingly,” Lim said, adding that, “Thai Bev may oppose the sale since it may not significantly benefit from it having only recently acquired FN shares at $8.88 per share and near our target price of $9.16.”
One of the reasons cited by Thai Beverage for its investment in FN was the latter’s strategic stake in APB which has a strong presence across the region.
Kirin is also being seen as a potential bidder for APB, which could complicate the stake sale, say analysts.
Roger Tan, CEO of SIAS Research recommends staying clear of all the players involved in the deal due to the uncertainty surrounding it.
“If there’s going to be a tussle, I don’t think you want to touch all the fierce parties involved. Keep your hands off the parties for now,” he said.
By CNBC’s Ansuya Harjani