Heineken Mulls Raising APB Bid to About S$53 a Share

Thai Beverage/F& N/APB: Charoen is said to be Thailand’s second richest man with a total net worh of US$5.5b Since listing in 2006, ThaiBev has aggressively expanded, notably acquiring Bangkok listed Serm Suk PLC last Sept for THB6.4b, and has also restructured its sales networks for Chang Beer and spent heavily on promotions. Proposed investment of F& N and APB immediately diversifies grp’s company geographically and is highly complementary to its existing single market focus. Note however that for Thai Bev, unless an equity raising exercise is on the cards, it might need some time to digest the purchase of F& N Stake.

CIMB note that at $50 share price for APB, implies c.33x annualized FY12E P/E (fairly rich) and believe Thai Bev's $8.88 offer price for FNN has imputed a similar premium for its F& B business but a discount for its property segment (60% of FNN's SOTP). Assuming that $8.88 implies a 15-20% discount to the FNN Group, estimate that Thai Bev is willing to pay $60-65/share for APB.

As a new substantial shareholder of FNN, the group stands to lose out in lower valuations for FNN shares after the Heineken deal. Add that the FNN Group without APB should not command the same valuations as before. Overall, house believe there is a high chance that the bid will not succeed since FNN itself should be unwilling to give up its F& B exposure while major shareholder (Kirin) is likely to veto any sale to Heineken. If the offer does go through, FNN will receive S$5bn in cash to make an estimated $4b divestment gain. This could result in a large special dividend.