(Recasts with Overseas Union-led group deciding not to raise bid)
* Overseas Union chooses not to increase S$9.08-per-share offer
* Raising price unattractive after Singapore cools property mkt -Overseas Union
* Charoen's last offer at S$9.55, Thais already own over 40 pct of F&N
By Eveline Danubrata and Saeed Azhar
SINGAPORE, Jan 21 (Reuters) - Thailand's third-richest man is set to take control of Fraser and Neave Ltd (F&N) in Southeast Asia's biggest M&A deal after a group led by an Indonesian tycoon bowed out of a two-month bidding war for the $11.4 billion Singapore company.
The group led by Stephen Riady's Overseas Union Enterprise Ltd threw in the towel after Thailand's TCC Assets Ltd, headed by billionaire Charoen Sirivadhanabhakdi, raised its takeover offer for F&N to S$9.55 a share last week and bought additional stock in the open market to build its existing F&N holding to more than 40 percent.
At stake is F&N's real estate portfolio worth more than S$8 billion ($6.52 billion) and soft drinks, dairy and publishing businesses. F&N sold Tiger Beer to Dutch brewing giant Heineken NV in September.
"OUE is a disciplined investor and at all times acts in the best interests of its shareholders," Overseas Union said in a statement after the market close on Monday, adding that it will explore and pursue other acquisitions.
Overseas Union said it decided not to revise its offer of S$9.08 a share as it would have had to raise the price significantly to gain control of more than 50 percent of the 130-year-old company.
Such a move was no longer attractive after recent measures taken by the Singapore government to cool the city-state's property market, Overseas Union said.
The Singapore government this month imposed a higher stamp duty on foreign buyers, a new levy on sellers of industrial property and a limit on loan sizes. As a percentage of home sales, buying by foreigners in Singapore declined to just over 6 percent last year from 18 percent in 2011, Citigroup said in a report.
F&N also has a food and beverage business which its second-biggest shareholder, Kirin Holdings Co Ltd, had offered to buy for S$2.7 billion had the Overseas Union group's bid been successful. The Japanese brewer owns a stake of around 14.8 percent in F&N.
Overseas Union's dropout was not expected by all in the market as F&N shares rose 1.7 percent to close at S$9.74 in Singapore trading on Monday, indicating some investors were betting on a counterbid.
Charoen gained the upper hand when he amassed a stake of more than 40 percent in F&N by purchasing an additional 90.8 million shares, or a 6.3 percent stake in F&N, at S$9.55 each on Friday and another 2.2 million shares on Saturday.
Charoen initially bought a 22 percent stake from Singapore's OCBC Group in July at S$8.88 a share. He has spent about S$5.2 billion at an average price of S$8.98 per share to build up his stake in F&N.
F&N's independent financial advisor JP Morgan has said its sum-of-the-parts valuation is S$8.58 to S$11.56 per share.
"F&N independent directors, as advised by its IFA (Independent Financial Advisor), will evaluate TCC Assets' revised offer and make their recommendations to shareholders in due course," an F&N spokeswoman said when asked to comment on what the company plans to do after Overseas Union decided not to raise its offer.
If Charoen wins control of F&N, analysts say he is likely to use F&N's distribution network in Singapore and Malaysia to sell his other products and to market F&N brands in Thailand, where he already has an edge.
"They get a well-established conglomerate with a property portfolio, and for the food and beverage segment, there are a lot of ways Thai Beverage and F&N can cooperate together and derive synergy," said Goh Han Peng, an analyst at DMG & Partners Securities in Singapore.
If Charoen wins, F&N will have to pay a break fee of up to S$50 million to the Overseas Union group.
Charoen, whom Forbes says is worth $6.2 billion, had extended the deadline of his previous offer seven times and the Overseas Union group twice. The multiple extensions have tested the patience of F&N shareholders.
Singapore's securities watchdog, Securities Industry Council, intervened last week by calling an unprecedented auction on Monday to end the protracted takeover battle between the two tycoons.
The auction was triggered because neither bidder declared a final offer by a deadline on Sunday set by the council.
Charoen's advisors are Morgan Stanley, DBS Bank Ltd and United Overseas Bank Ltd. The Overseas Union group was advised by Credit Suisse, Bank of America Merrill Lynch and CIMB. ($1 = 1.2277 Singapore dollars) (Additional reporting by Prakash Chakravarti of IFR; Editing by Ryan Woo)