Thai Bev’s battle with Heineken may benefit Chang beer more

23-Aug-2012

The takeover battle between Singapore-listed Thai Beverage, owned by Charoen Sirivadhanabhakdadi, who has a history of making money by battling foreign brewers, and Heineken seems to be a repeat of the business model he used before to gain management know-how and a distribution network, both key drivers of success at the regional level.

In 2005, ThaiBev forced Denmark-based Carlsberg to pay US$120 million (now 3.76 billion baht) to settle a legal dispute and end their 12-year relationship in Thailand's beer market.

During that long relationship, ThaiBev had gained both brewing and management know-how from Carlsberg, knowledge that helped the company establish its Chang beer in the Thai market.

The company last month set off a battle over Singapore's Asia Pacific Brewery, the maker of Tiger beer, and is poised to see big gains in a tussle with Dutch brewing giant Heineken, which needs to invest heavily to take majority control of APB and protect its business in |the emerging Southeast Asian market.

APB's share price reached 53 Singapore dollars (US$42) on Tuesday, up 4.8 per cent, with 2.2 million shares being traded in one day.

The price increase followed Heineken's raising of its offer to buy APB shares from Fraser & Neave (F&N) from S$50 to S$53 apiece, in a move aimed at taking over the alcoholic-beverage company and increasing its share in Southeast Asia, which is one of the fastest-growing beer markets.

Heineken continued to inch towards a takeover of APB yesterday, revealing that it had purchased a 2.68-per-cent stake in the company for about US$290 million, even as it struggles to buy a much larger, controlling stake from Singapore's Fraser and Neave for $4.7 billion, according to The Associated Press.

Chief executive Jean-Francois van Boxmeer said the APB deal was an important part of Heineken's growth plans. F&N, with a history of more than 80 years in Southeast Asia, has three core businesses: food and beverages, property, and publishing and printing.

Its food and beverage business operates 31 breweries in 15 countries in the Asia-Pacific region.

Thapana Sirivadhanabhakdi, president and chief executive officer of ThaiBev, said in a company statement released last month - when it entered to sales and purchase agreements to acquire ordinary shares of F&N from Oversea-Chinese Banking Corp, Great Eastern Holdings, and Lee Rubber - that becoming a shareholder of F&N presented a great opportunity.

He said it would contribute to the synergy of both parties and ThaiBev would gain exposure to the knowledge and experience of the F&N management team, which has great expertise in Asean.

A source in the beverage industry argued, however, that it would be impossible for ThaiBev to take majority control of APB and put Chang beer into its regional distribution network.

Another source said the move was merely a "financial deal" proposed by ThaiBev to reap financial benefit from speculation. It is just a game played by millionaires, he added.

ThaiBev, whose Chang is Thailand's No 2 beer brand, and also sells spirits and soft drinks, generated only about 3.7 per cent of its 2011 revenue of 132 billion baht from outside the Kingdom, according to data compiled by Bloomberg.

Mergers and acquisitions have become a key strategy adopted by the company to short-cut its |expansion, both domestically and abroad.

ThaiBev recently took over Serm Suk, the local bottler and distributor of Pepsi-Cola. Serm Suk will end its contract with the US-based soft-drink giant in November. The takeover will, however, allow ThaiBev to expand its non-alcohol products aggressively via Serm Suk's strong distribution network covering more than 200,000 retail and food outlets.

Whether or not ThaiBev will be able to take majority control over APB, the result of the takeover battle with Heineken will be favourable for the Thai beverage giant, as it can make a healthy profit from its crucial investment in the Singaporean brewer.