SINGAPORE/BRUSSELS Heineken NV (HEIN.AS) launched a S$5.1 billion ($4.1 billion) bid to take control of Asia Pacific Breweries Ltd (APB) APBB.SI, seeking to push out a Thai billionaire and would-be partner and setting up a battle for the maker of Tiger Beer.
The fight for APB comes amid a wave of industry consolidation and steady growth in emerging-market beer sales, although APB's ownership structure makes this among the most complicated assets to buy.
Analysts said Heineken's S$50 per share offer would not be the final play, with rivals Thai Beverage PCL (TBEV.SI) and Japan's Kirin Holdings Co Ltd (2503.T) unlikely to readily let the world's third-largest brewer take control of a beer empire stretching from Mongolia to New Zealand.
Heineken's offer on Friday completed a frenetic week for APB and Fraser and Neave Ltd (FRNM.SI), a Singapore conglomerate whose joint venture with Heineken has a 65 percent controlling stake in APB.
The action began on Monday when Singapore bank OCBC (OCBC.SI) said it had received a bid for its stakes in F&N and APB, an ownership interest it held since 1948.
Companies linked to Thai billionaire and Thai Bev founder Charoen Sirivadhanabhakdi emerged on Wednesday as the bidders, agreeing to pay S$3.8 billion for a 22 percent of F&N and 8.5 percent in APB at S$45 per share, the former set to eclipse all previous overseas deals by a Thai group.
Kirin holds 14.7 percent of F&N.
Heineken's offer is to buy out F&N's interest in APB. If successful, it would then pay a further S2.4 billion to buy out minority shareholders, bringing the total bill to S$7.5 billion ($6.0 billion).
The key to Heineken's offer is whether it can convince F&N shareholders, many of them investment companies, to sell their brewing operations.
"I think Heineken is unlikely to get APB at this price," said Nomura analyst Ian Shackleton.
"Either ... Heineken will have to pay more, or we could end up with a bigger break-up of APB," Shackleton said. "That of course would be difficult given the brewers would all want the Indo-China business ... In any case, the status quo looks unlikely."
F&N said in a statement its board was considering Heineken's offer.
FAST-GROWING ASIAN MARKETS
Heineken shares hit a three-month high in early trading and were up 1.4 percent at 0920 GMT. The STOXX Europe 600 food and beverage index was down 0.3 percent.
"Strategically, we like the deal," said Bernstein analyst Jean-Marc Chow. "However, given Heineken's patchy record of M&A, some investors might be worried that they might overpay."
F&N and APB suspended trading of their shares after the Heineken offer. Thai Bev shares ended up 7.4 percent. Traders said it was buoyed by the prospect that its high-priced bid would be scuppered.
The Thai Bev bid had put pressure on Heineken to protect its highly valued investment in APB, which operates in 14 Asian countries including fast-growing Indonesia.
APB gets 45 percent of its pretax earnings on sales in Thai Bev's own back yard - Thailand, Vietnam, Cambodia and Laos.
In Asia Heineken also has a joint venture in India with Kingfisher tycoon Vijay Mallya. Its volumes in the region grew 6.2 percent last year, compared with just 0.2 percent in western Europe and 1 percent in the Americas.
"People were expecting something from either Heineken or Kirin, but how fast Heineken moved is the surprising thing," said Andrew Chow, head of research at UOB-Kay Hian in Singapore.
Heineken's offer includes a S$163 million offer for F&N's interest in the non-APB assets held by Asia Pacific Investment Private Ltd, a 50-50 joint venture between Heineken and F&N.
"We really value our partnership with F&N, which goes back over 80 years, but due to changes in the F&N and APB shareholding, the fabric of the partnership has changed," Heineken Chairman and CEO Jean-Francois van Boxmeer said.
It was time for Heineken to look ahead to the "next chapter of our Asian business," he said.
As of the end of last year, Heineken had cash of 813 million euros ($996.8 million), according to Thomson Reuters data. The company also had a comfortable net debt-to-EBITDA ratio of 2.2.
Heineken, the biggest brewer in mature western Europe, has so far failed to gain scale in China, the world's largest beer market by volume, despite acquisitions over the years.
Its biggest push into emerging markets was the purchase in 2010 of the brewing assets of Mexico's FEMSA (FMSAUBD.MX) (FMX.N).
There, rival Anheuser-Busch InBev (ABI.BR), the world's largest brewer, recently paid $20.1 billion to take over Grupo Modelo, a top price balanced against the promise of expected annual savings of at least $600 million.
Analysts said Heineken had far less scope for cutting costs, given it was managing the business already.
Jean-Marc Chow said Heineken's offer represented an enterprise value to core profit (EBITDA) multiple of 16.5 times, compared with ABI's Modelo buyout equivalent of 15 to 16.
"In theory, APB already has access to Heineken's best practice, but that was also the case at Baltika, and Carlsberg still found major savings when it bought out Scottish & Newcastle's stake in the joint venture," he said.
ThaiBev's offer comes at a time when the country's corporates, riding a wave of southeast Asian economic growth, are more confident in venturing beyond their borders.
PTT E&P PTTE.BK outbid Royal Dutch Shell Plc (RDSa.L) this week in a five-month bidding war for Cove Energy Plc's COVE.L east African offshore oil discoveries.
Kirin declined comment on Heineken's offer.
Thai Bev said it had already signed an agreement to complete its purchase of a stake in F&N.
HSBC (HSBA.L) and Morgan Stanley (MS.N) are advising the Thai buyers, sources with knowledge of the deal said. Credit Suisse CSGN.VX and Citigroup (C.N) are advising Heineken on its bid. ($1 = 0.8156 euros) ($1 = 1.2541 Singapore dollars)
(Additional reporting by Eveline Danubrata, with James Topham in Tokyo and Denny Thomas in Hong Kong; Editing by John O'Callaghan and David Holmes)