SINGAPORE/LONDON Heineken's resolve to buy out Asia Pacific Breweries (APB), the maker of Tiger beer, is being tested by a group linked to Thailand's second-richest man as the fight for a bigger slice of one of the world's fastest-growing beer markets intensifies.
The surprise counter-offer by a company owned by Charoen Sirivadhanabhakdi's son-in-law to acquire Fraser and Neave's (F&N) (FRNM.SI) direct stake in APB topped Heineken's (HEIN.AS) bid for the rest of the company it does not already own by 10 percent.
That was the second time the Thai billionaire has put Heineken, the world's third-largest brewer, in a spot.
Last month, companies controlled by Charoen paid $3 billion, for stakes in Singapore-listed F&N and APB APBB.SI, prompting Heineken to bid $6 billion, or S$50 a share, for F&N's direct and indirect stakes in APB. Heineken already controls about 42 percent of the brewer, mostly through a joint venture with F&N.
"If push comes to shove, Heineken would have to raise its offer for APB," said Roger Tan, chief executive of SIAS Research. "(The Thais) did a very smart move. They only went in to say they want to buy F&N's stake, so it allows them to be the spanner in the whole deal."
Heineken said on Wednesday that it was continuing its discussions with F&N, and that the offer from Charoen's son-in-law, via a company called Kindest Place, for the APB stake is not comparable with its own offer for the whole of APB.
Charoen and his companies, including Thai Beverage PCL (TBEV.SI), and Heineken are vying for influence over F&N's crown jewel, APB, due to its exposure to fast-growing emerging beer markets in southeast Asia.
For Heineken, control of APB is crucial as this will raise the proportion of its profits from Asia to 15 percent from 6 percent, and get ownership of Tiger, Bintang, Anchor and other beer brands, and two dozen breweries in 14 countries including Singapore, Malaysia, Indonesia, Vietnam, Thailand and Cambodia.
The Dutch brewer was put on the back foot after Kindest Place offered S$55 a share to buy F&N's direct stake of 7.3 percent in APB on Tuesday, S$5 a share more than what Heineken agreed to pay for the whole of APB in its deal announced last week.
If the latest Thai offer succeeds, Kindest Place will control nearly 16 percent of APB, having already agreed to buy 8.6 percent of the beer maker at a lower price of S$45 a share.
APB shares jumped to close at a record high of S$52.50, up 7.5 percent, while F&N shares ended 2.5 percent higher at S$8.49 and have surged over 37 percent this year. Heineken shares were 0.1 percent ahead at 44.43 euros after Tuesday's sharp fall.
European analysts say Heineken will hold its fire and suspect Kindest Place is playing a poker game to push Heineken into raising its bid, allowing Kindest Place to sell out at a profit, as it bought its initial APB stake at S$45 a share.
"Heineken still has good cards in our opinion to get away with the S$50 bid price, given the fact that about 30 percent of APB's volumes is coming from the Heineken brand," said analyst Wim Hoste at KBC Securities.
The Dutch brewer could take back the Heineken beer license from APB at a fairly low cost, and the subsequent volume loss could tempt F&N's board to accept Heineken's offer, Hoste added. SNS Securities analyst Richard Withagen agreed.
"We believe that this new offer will not trigger Heineken to increase its current offer. Moreover, we expect F&N's board to continue to recommend Heineken's offer to its shareholders".
Despite the speculation of a bidding war, a source at ThaiBev (TBEV.SI) said the Thai company is willing to share control of APB with Heineken and does not intend to oust the Amsterdam-based brewer.
If both parties do clash in a bidding war, Heineken, with a market capitalization of $31.7 billion, may have the upper hand. The Thai maker of Chang beer has a market value of $6.7 billion.
ThaiBev has taken out a S$2.8 billion ($2.25 billion) loan to finance its purchase of Oversea-Chinese Banking Corp's (OCBC.SI) 24 percent stake in F&N. It had 3.5 billion baht ($111.2 million) in cash and equivalents at the end of 2011, a fraction of Heineken's 827 million euros ($1.03 billion).
But analysts said it was hard to estimate how Charoen's other non-listed companies have in their war chest.
ThaiBev is F&N's biggest shareholder with about 24 percent. Japan's Kirin Holdings (2503.T) is the second-largest with a 15 percent stake.
(Additional reporting by Khettiya Jittapong; Editing by Erica Billingham)