MOODY'S Investors Service yesterday said its Baa2 rating for Thai Beverage remains on review for a downgrade after its controlling shareholder Charoen Sirivadhanabhakdi last week mounted a takeover bid for Fraser & Neave (F& N) via TCC Assets.

Although Mr Charoen's $8.8 billion offer for the close to 70 per cent of F& N he does not yet control has no immediate impact on ThaiBev's ratings, the move raises uncertainty over the Thai tycoon's motivations and influence over the group's strategic direction, Moody's vice-president and senior analyst Annalisa di Chiara said.

There is also uncertainty over its potential exposure to non-core businesses like real-estate, she added. Apart from its non-beer food and beverage businesses, F& N owns through Frasers Centrepoint a portfolio of residential, commercial and hospitality assets estimated to be worth billions.

The F& N stake held by ThaiBev, TCC Assets and other related parties had risen past the 30 per cent mark last week, triggering a mandatory offer.

News of the bid sent F& N's share price surging last week. Yesterday, it rose to a high of $9.01 before closing unchanged at $8.97, above Mr Charoen's offer price of $8.88 per share.

A disclosure announcement yesterday showed that Prudential's funds' combined stake in F& N has dropped to 7.8063 per cent from about 8 per cent last week. Its unit Eastspring Investments sold 2.5 million F& N shares at $8.70 each on Thursday and 150,000 shares at $8.97 on Friday. Another Prudential subsidiary, Jackson National Asset Management, bought 5,000 F& N shares at $8.92 a piece on Thursday.

Mr Charoen's takeover bid also brews fresh uncertainty over F& N's plan to sell its stake in Tiger Beer maker Asia Pacific Breweries (APB) to Dutch brewer Heineken.

The Thai parties have given no indication of how they will vote on Heineken's improved $5.6 billion offer for F& N's APB stake. That has won approval from F& N board's but still needs shareholder approval at the extraordinary general meeting on Sept 28.

" Should Heineken's bid for APB be successful, we expect ThaiBev to use a portion of the sales proceeds to reduce debt on its balance sheet, which would be credit positive," Ms Di Chiara says. But greater exposure to unrelated businesses like real estate also means new execution risks and a more aggressive risk tolerance from management, which are credit negative.

If Heineken's bid falls through and F& N retains ownership of APB, Moody's sees this as credit positive for ThaiBev. But that could be offset by the weakening in the company's financial profile.

Moody's calculates that the company's current leverage position as measured by debt/Ebitda (earnings before interest, taxes, depreciation and amortisation), is about 3.5 times, higher than its historical level of less than 1x. So far, ThaiBev has spent around $3.6 billion to acquire its own accumulated 28.9 per cent stake in F& N, largely funded with debt.

ThaiBev closed unchanged at 34.5 cents a share. APB rose 9 cents, or 0.17 per cent, to $53.09 a share.