F&N ... Aug12

Most agree that the breakup will come. The fact that people are still buying into the companies shows they still see value in the food and beverage assets. Many players have previously said that the market has never been short on buyers, rather on quality sellers. The two major shareholders, ThaiBev and Kirin are not property developers. So it would make sense for them to focus on the F&B business and leave the property division.

 

Assuming Coca-Cola is a keen acquirer, implications for F&N Malaysia are positive. Coca-Cola would either have to acquire F&N’s 51% stake in F&N Malaysia, which would trigger a GO or offer to acquire the soft drinks division. Calculation suggest that the bottling business is worth at least rm1 billion.

 

If APB is sold then the next asset play within the group would be F&N Malaysia and not long ago, Kirin was said to be mulling a bid fro the non beer F&B assets. Recent comment by Kirin’s president that it invested in F&N fort its F&B operations further fuels the belief that Kirin ’s move to buy a 14.7% stake in F&N from Temasek in 2010 was driven by its stake in F&N Malaysia.

 

In the meantime, all eyes will be on the upcoming EGM for shareholders to approve the Heneiken bid, even though no date has been set. The jury is still on whether Thai businessmen who owns ThaiBev will make a move to block Heneiken’s bid. It was Charoen’s buying of a 22% stake in F&N in July 2012 that triggered the situation and he has since upped his stake to 24.1% by buying through the open market.

 

Market observers are not discounting more twists and turns ahead, which could include a potential counter bid from ThaiBev. Kirin holds the key to whether APB is eventually sold. ThaiBev is likely to vote against the proposed sale as APB is a better strategic fit for it than APB is for Kirin . If Kirin agrees, it is likely that the final decision will be the sale of APB to Heneiken.

 

If the sale is rejected by shareholders, Heneiken could come back with a higher offer, which would extend the proceedings by a few more months. The worst case scenario is if the sale is rejected and status quo remains would have an adverse impact on the share price of F&N Malaysia and APB.