F&N shares jump to record after deal with Heineken

SINGAPORE Mon Aug 6, 2012 12:31am EDT

Bottles of Tiger and Heineken beers are pictured on the shelf of a grocery store in Singapore July 20, 2012. REUTERS/Tim Chong

Bottles of Tiger and Heineken beers are pictured on the shelf of a grocery store in Singapore July 20, 2012.

Credit: Reuters/Tim Chong

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SINGAPORE (Reuters) - Fraser and Neave Ltd (FRNM.SI) shares jumped to a record on speculation that a break-up of the Singapore conglomerate will unlock more value after its board accepted Heineken's $4 billion offer for its stake in Asia Pacific Breweries (APB).

F&N rose as much as 4.9 percent to S$8.55, and it was the top traded stock by value in the Singapore market. APB APBB.SI fell 1.3 percent to S$48.84.

As F&N's share price does not reflect the true value of its independent businesses, a break-up of the group would make it more focused and would lure suitors to each individual segment, analysts say.

That would be a more attractive option for stakeholders such as Thai Beverage PCL (TBEV.SI) and Japan's Kirin Holdings (2503.T), according to the analysts.

F&N's consumer business is valued at about $6.7 billion, while the property division is valued at $6.1 billion, according to Breakingviews estimates.

The stake purchase in APB announced by Heineken on Friday gives the Dutch brewer 82 percent of the maker of Tiger Beer.

"Now that the board has accepted the offer, it appears that the chances of a higher offer have receded, that's why APB shares fell. For F&N, now that they have agreed to the sale, it's likely that the whole group will be broken up," said an analyst at a Singapore brokerage, declining to be identified because he is not authorized to speak to the media.

About 47.5 percent of F&N's first-half earnings came from property, 44 percent from beer and 3.3 percent from soft drinks, Nomura Holdings estimates.

Coca-Cola (KO.N) is keeping an eye on F&N's popular soft-drink 100PLUS, fruit juices, mineral water and dairy products unit, a source familiar with the situation had told Reuters.

CIMB Research upgraded its rating on F&N to 'outperform' from 'neutral' and raised its target price for the stock to S$10.00 from S$7.20.

F&N could pay out part of the proceeds as special dividends, which at the current share price mean dividend yields of over 9 percent, according to CIMB.

"Longer-term prospects will be driven by the group's ability to reinvest the proceeds into accretive assets to replace the substantial loss of future income from APB," CIMB said.

(Reporting by Eveline Danubrata in SINGAPORE and Denny Thomas in HONG KONG; Editing by Ryan Woo)

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