-- Heineken makes S$5.1 billion (US$4.06 billion) offer for Fraser & Neave's 39.7% stake in Asia Pacific Breweries
-- Deal would boost Heineken's presence in lucrative Asian beer market
-- Thai Beverage says Heineken bid for APB has no impact of its offer for F&N stake
SINGAPORE--A battle for control of Asia Pacific Breweries Ltd. , maker of Tiger beer, emerged Friday after Heineken NV launched a 5.1 billion Singapore dollar (US$4.06 billion) takeover offer to buy out its joint venture partner.
Heineken's offer of S$50 a share could effectively end an 80-year partnership between the Dutch company and Fraser & Neave Ltd. (F99.SG), its Singapore-based partner, which each own a 50% stake in a joint venture set up in 1931 that controls Asia Pacific Breweries.
Heineken is battling Thai Beverage PCL , Thailand's biggest beer maker, which earlier this week said it had agreed to buy a 22% stake in Fraser & Neave. The strategic importance of APB sets up the possibility of a bidding war for the brewer.
At stake is a foothold in the Asian beer market, which has become the next battleground for beer makers because of its swelling middle class. Asia is the largest beer market in the world, with almost a quarter of the US$615.8 billion in global beer sales last year, and one of the fastest-growing, according to Euromonitor International. With beer consumption flat in the West, beer makers are increasingly counting on the consumers in rapidly growing economies such as China and India to boost their bottom lines.
"When you look at the Asia-Pacific region, the numbers are just staggering," said Richard Vantuno, a Hong Kong-based executive director at Ipsos, a market research firm. "Brewers need this market to continue growing."
For Heineken, control of Asia Pacific Breweries would allow it to move away from its core European market, where it has seen declining beverage sales. It would allow Heineken to expand in emerging markets that have contributed significantly to its global sales in recent years.
"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 Chief Executive Jean-Francois van Boxmeer said in a statement Friday.
"As a result, it is time for us to look ahead to the next chapter of our Asian business, in which Singapore will continue to be our regional headquarters and both the Heineken and Tiger brand will spearhead our brand portfolio in Asia."
Heineken's offer for all of Fraser & Neave's 39.7% stake represents a 19% premium over APB's Thursday closing price of S$42. Heineken added that it will make a S$2.4 billion general offer for all APB shares it doesn't own when conditions of its offer are met, in accordance with Singapore takeover law.
At 1442 GMT, Heineken shares were up 0.80% at EUR43.37.
A spokesman from Heineken said Friday that the financing of the APB offer price will consist of existing cash and debt, without specifying. An equity component isn't foreseen at the moment, he said, adding that Heineken doesn't expect any problems to arise with the financing: "We have a good story to tell to debt investors. APB is a successful company in a growing market and region."
Equity as a means of financing is different for Heineken than for other companies. The Heineken family indirectly owns a controlling stake in the company via three steps: the family owns 88.55% in investment vehicle L'Arche Green NV, which holds a 51.083% stake in Heineken Holding NV, which holds a 50.005% stake in Heineken NV.
Heineken said its offer is in line with its strategy to expand in emerging markets and follows deals in recent years that have included the acquisition of the brewing operations of FEMSA in Mexico and Brazil, a partnership with United Breweries in India and acquisitions and capacity investments in Africa. The Dutch brewer said that it will have direct access to a number of important markets including Cambodia, China, Indonesia, Malaysia, New Zealand, Papua New Guinea, Singapore, Thailand and Vietnam.
Thai Beverage Senior Vice President Vichate Tantiwanich said in an interview Friday that Heineken's offer for APB doesn't affect the Thai company's investment in Fraser & Neave. ThaiBev will become Fraser & Neave's largest shareholder with a 22% stake.
Fraser & Neave is 15%-owned by Japanese beverage giant Kirin Holdings Ltd. (2503.TO).
A Kirin spokesman said Friday that it is watching developments closely, but declined to comment on any specific action it may take.
Both representatives at Fraser & Neave and Asia Pacific Breweries weren't immediately available for comment.
Shares of both Fraser & Neave and APB were placed in trading halts on the Singapore Exchange Friday.
Citigroup and Credit Suisse are advising Heineken, while HSBC and Morgan Stanley advised ThaiBev.
--Kathy Chu in Hong Kong contributed to this article
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