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ThaiBev: elephant in the boom (Financial Times)

Take four-fifths of the spirits market in a large and growing economy. Add a decent soft drinks business and a strong distribution network to what is already one of the top five spirits producers in the world by sales volume – and you have the new, improved Thai Beverage. The takeover of Fraser and Neave by ThaiBev’s controlling shareholder has officially closed. Now to see what ThaiBev gets from it.

Since Thai billionaire Charoen Sirivadhanabhakdi launched his bid for Singapore’s F& N in September through TCC, his private vehicle, ThaiBev’s shares have rallied by two-thirds. The first question is how he will split the group. Assuming Mr Charoen wants F& N’s property portfolio for TCC, the tidiest solution for the drinks unit would be for ThaiBev to sell its 29 per cent in F& N to the company and use the funds to purchase the drinks business for, say, the S$2.7bn that Kirin wanted to pay for it. That leaves ThaiBev S$1.2bn to pay down the debt it took on to buy the stake.

Assuming that happens, the next question is what the F& N unit brings to one of the most profitable drinks businesses in the world. ThaiBev’s 80 per cent of the spirits market in Thailand means the division’s operating margin of 20 per cent beats Diageo’s in the region, according to CIMB, although some is lost covering for losses at Chang (elephant) beer. Still, synergies with F& N look genuine. F& N’s soft drinks can be sold into Thailand, whose population is double that of its current market of Singapore, Malaysia and Brunei. And F& N’s heft outside Thailand should be able to boost Chang sales.

The most entertaining synergy would be if ThaiBev’s newly expanded reach could lift support for Everton, its Chang-sponsored UK premiership football team, currently ranked sixth. But some deal effects really are too hard to quantify.