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ThaiBev Says Affiliated Party Is Considering F&N Offer

NEW YORK ( TheDeal) -- Putting Heineken NV on high alert, Thai Beverage PCL said Tuesday, Sept. 11, that it is in talks with an unnamed partner regarding a potential takeover offer for Singapore drinks-to-property conglomerate Fraser and Neave Ltd.

"The board understands that a party acting in concert with the company [ThaiBev] is exploring the possibility of making an offer for F&N," ThaiBev, controlled by Thai billionaire Charoen Sirivadhanabhakdi, said in a filing to the Singapore Exchange.

ThaiBev denied earlier press reports that it was seeking funding for a general takeover offer, explaining that it has been looking to refinance a loan it took out to finance its initial investment in Fraser and Neave announced in early August.

"The company is not seeking funding for a potential general offer" for Fraser and Neave," ThaiBev said, issuing the standard disclaimer that there is no certainty of an offer materializing.

The move comes less than three weeks before a Sept. 28 vote by Fraser and Neave shareholders on Heineken's sweetened 5.6 billion Singapore dollar ($4.5 billion) offer for Fraser and Neave's 40% stake in Tiger beer maker Asia Pacific Breweries Ltd. That offer is backed by Fraser and Neave's board.

A Heineken spokesman said the company had noted ThaiBev's statement. "We're not in a position to comment on what they may or may not do in the future," he said. "Our focus remains on the F&N EGM on Sept. 28."

Gerard Rijk, an analyst with ING Barings in Amsterdam, said that ThaiBev lacks the financial resources to take over Fraser and Neave on its own and would need to cover a financing gap of more than $7 billion, which won't be easy.

"They could probably borrow about $3 billion of that, "he said, "but they would have to find someone to cover the rest."

One potential scenario is that ThaiBev join forces with a company interested in Fraser and Neave's property assets. These assets include Singapore developer Frasers Centerpoint Ltd., reportedly worth up to S$7.7 billion.

In the meantime, Rijk said that Fraser and Neave investors would be best off taking the cash promised by management for the APB stake divestment. The payout is worth S$8.50 per cancelled share - or S$4 billion in total - and will also be voted on later this month.

"It's an offer shareholders can't refuse," said Rijk. "The alternative is that you will end up being held hostage in a fight between ThaiBev and Heineken."

ThaiBev, as Fraser and Neave's largest shareholder, would also gain financially from tendering their own shares in APB to Heineken.

As for Heineken, "all they can do is wait," said the analyst, who recommends holding Heineken shares, with a price target of ¿49.20..

Heineken shares were trading little changed at just below ¿43.33 late Tuesday morning on the Euronext Amsterdam exchange, for a market capitalization of about ¿24.96 billion ($31.93 billion). In Singapore, Fraser and Neave shares rose 1.3% to trade at S$8.66, for a market value of S$12.3 billion.

Heineken increased its bid from for the APB stake from S$50 a share to S$53 to ward off ThaiBev, Fraser and Neave's largest shareholder.

ThaiBev has spent a total of S$3.6 billion building up its stake in Fraser and Neave to about 29%. Japan's Kirin Holdings Ltd. is Fraser and Neave's second-largest shareholder.

While ThaiBev hasn't crossed the 30% threshold which would trigger a mandatory general offer, the stake is potentially enough to stand in Heineken's way.

Heineken's offer requires clearance from a simple majority of shares voted at the upcoming Fraser and Neave meeting, while the proposed capital reduction requires the support of 75% of shares voted.

Heineken is the world's No. 3 brewer after Anheuser-Busch InBev SA and SABMiller plc. If the APB deal goes ahead, it would be its biggest since it gulped down the beer operations of Coca-Cola Co. bottler Fomento Económico Mexicano SAB de CV, or Femsa, for $7.4 billion.

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