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Comment - Will Heineken move to protect its Tiger?

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Few thrive on uncertainty, particularly businesses. Dutch brewer Heineken must be feeling that pressure currently, as negotiations take place over a deal involving its joint venture, Asia Pacific Breweries (APB).

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Chang brewer ThaiBev is currently circling Heineken's JV partner, Fraser and Neave, and APB, with the possibility of making a bid for Oversea-Chinese Banking Corps and Great Eastern Holdings combined stakes in the businesses. The stakes together are said to be worth a cool US$2.1bn. 

But, Heineken has a problem. And, it's not one they were necessarily anticipating. If ThaiBev does get it hands on the F&N stake, it will become the Singapore conglomerate's biggest shareholder. Meanwhile, Japanese brewer Kirin will be its second biggest stakeholder.

As one analyst noted, this would leave APB, a subsidiary of F&N, "highly unstable" and could lead to a break-up of Tiger brewer APB. Tiger and Chang compete as imported premium brands in markets around the world. Nomura suggested that Heineken would either have to cough up some cash to "secure its position" or "accept a dilution of control".

I understand the announcement that ThaiBev could swoop came as a slight surprise to Heineken. No official statement was put out by the brewer, but a spokesperson who briefed journalists yesterday, said the company was "considering our options to make sure our interests are safe-guarded".

Heineken has plenty of emotional attachment to APB, as it set up the venture with F&N back in 1931, originally as Malayan Breweries Ltd. Today, APB currently operates a global marketing network across 60 countries, supported by 30 breweries located in 14 countries. And, its flagship beer brand, Tiger, is available in 60 markets. 

Not least, Heineken will not want to lose its foot in the emerging Asian markets, as Western Europe continues to struggle. It currently earns half its profits from emerging markets. 

The Dutch brewer could even decide to launch a counter bid for F&N, capture the brewing assets, then sell the remainder, analysts were reported as saying. Gerard Rijk, beverage analyst at ING in Amsterdam, said Heineken could "easily afford to do so".

With so much at stake, Heineken's finance bods could well be frantically tapping their calculators at this very moment. ThaiBev's move has been branded "aggressive", but perhaps Tiger's original brewers will come back with a bite? 


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