UPDATE 3-Overseas Union-led group, Thais battle for control of F&N

Fri Nov 16, 2012 12:26am EST

* Overseas Union-led consortium launches S$13.1 bln counter-bid

* Consortium offers S$9.08 a share vs Thai offer of S$8.88

* Consortium's offer near middle of F&N advisor's range

* F&N, OUE shares jump; market expects higher offer

* Credit Suisse, BofA underwriting bridge loans-sources (Adds comments from Overseas Union chairman, analyst)

By Eveline Danubrata and Saeed Azhar

SINGAPORE, Nov 16 (Reuters) - A consortium led by Overseas Union Enterprise Ltd launched a S$13.1 billion ($10.7 billion) bid for Fraser and Neave Ltd (F&N), challenging a takeover offer from Thailand's third-richest man for the Singapore conglomerate.

The counter-bid, if successful, would mark the largest-ever M&A deal in Southeast Asia. The F&N board has yet to recommend it to shareholders, the biggest of which are companies linked to Thai billionaire Charoen Sirivadhanabhakdi including Thai Beverage PCL and TCC Assets Ltd.

Charoen is likely to raise its S$8.88-a-share offer in response to the S$9.08-a-share bid announced by Overseas Union on Thursday as they battle to control F&N, whose real estate portfolio is worth more than S$8 billion, analysts said.

"OUE's offer is likely to be the first salvo in this fight," Jit Soon Lim, head of Southeast Asian equity research at Nomura, said in a note to clients. "TCC is likely to counter offer as it will want to defend its interest in the group."

The tussle also pits Charoen against one of the region's most powerful tycoons - Stephen Riady, the chairman of Overseas Union and son of Lippo Group founder Mochtar Riady. Singapore-based Overseas Union is majority-owned by Lippo Ltd , part of the Lippo Group, through its subsidiaries.

Overseas Union said in a statement on Thursday that it has secured conditional support from F&N's second-biggest shareholder Kirin Holdings Co Ltd to bolster its chances of success.

Kirin, which owns around 14.8 percent of F&N, will offer to buy the conglomerate's food and beverage business if the consortium's bid was successful, according to Overseas Union. The Japanese brewer was not listed as part of the consortium in the statement.

BRIDGE LOANS

Overseas Union is bringing out the big guns to gain control of the 129-year-old F&N, which manages thousands of serviced resident apartments in cities like London, Paris and Dubai. The conglomerate's property portfolio also includes retail malls, office towers and high-tech business parks in Singapore, Australia and Japan.

"All are good assets," Stephen Riady told Reuters on the sidelines of a conference on philanthropy held by Credit Suisse at the National University of Singapore on Friday, adding that they complement those owned by Overseas Union.

Credit Suisse and Bank of America Merrill Lynch are underwriting a bridge loan that covers the scale of the counter-bid, sources with knowledge of the matter said, while CIMB is also providing some financial support to Overseas Union.

The bridge loan will be around $8.5 billion to $10.5 billion in size, making it one of Asia's largest bridge financing deals, other sources familiar with the matter said, declining to be identified because they were not authorised to speak to the media on the subject.

The bridge loan will have a 12-month maturity, and the bulk of it will be repaid from the proceeds generated from the sale of F&N's beer, food and beverage businesses, the sources said.

Dutch beer giant Heineken NV agreed in late September to buy F&N's stake in Tiger beer maker Asia Pacific Breweries Ltd (APB) for S$5.6 billion. Overseas Union said Kirin has agreed to buy F&N's food and beverage business for S$2.7 billion if the counter-bid was successful.

The counter-bid was placed by a consortium that includes investment funds and accounts managed by Farallon Capital Management LLC and Noonday Global Management Ltd.

"These guys are prepared for the long-drawn (battle) unless the Thais give a knockout offer," a source with direct knowledge of the matter said about Overseas Union's bidding strategy.

Shares in Overseas Union rose 4.3 percent in Singapore trading on Friday, while F&N advanced more than 2 percent to S$9.33, indicating the stock market is expecting an even higher offer.

Shares in Kirin declined 3 percent in Tokyo.

CHAROEN TO FIGHT BACK

The S$9.08 counter-offer values the company in the middle of the S$11.9 billion-S$16.1 billion range estimated by F&N's independent financial adviser JP Morgan.

In an unusual move, F&N agreed to pay a break fee of as much as S$50 million to Overseas Union to create a competitive bidding environment, a source with knowledge of the matter said, even though F&N's board has not recommended the offer to shareholders yet.

If recent history is any guide, Charoen is likely to put up a strong fight. Earlier this year, the Thai billionaire forced Heineken to raise its offer to get control of APB.

Charoen, through TCC Assets and Thai Beverage, made a $7.2 billion bid in September to buy shares of F&N that he did not already own, valuing the Singapore group around S$12.8 billion.

The Thai group has a 33.6 percent stake in F&N and can acquire another 2.8 percent from shareholders who accepted its offer. The Thai offer is conditional on the group obtaining majority control of F&N.

F&N is slated due to announce quarterly earnings later on Friday.

(1 = 1.2227 Singapore dollars) (Additional reporting by Prakash Chakravarti of LPC/IFR, Charmian Kok in SINGAPORE, Denny Thomas and Stephen Aldred in HONG KONG; Editing by John O'Callaghan and Ryan Woo)