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NETHERLANDS/SINGAPORE: Heineken's "final" Asia Pacific Breweries offer will be "knock-out blow" - analyst

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Heineken's increased offer to Fraser  & Neave (F&N) for its total stake in Asia Pacific Breweries (APB) should be a "knock-out blow" in the battle for the Tiger brewer, according to an analyst. 

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The Dutch brewer said on Friday (17 August) that it has made a "final" offer to F&N of SGD53 per share for its indirect and direct stake in APB, for SGD5.4bn. F&N's board has agreed to the deal, which will now be subject to a shareholder vote.

In a note today (20 August), analysts Bernstein Research said: "We believe that this probably represents a knock-out blow." They highlighted that Heineken's offer can be seen as SGD50 per share for the indirect stake and SGD66.40 for the direct stake. On this basis, Heineken's rivals for APB, ThaiBev, cannot afford to bid for F&N's entire stake, Bernstein said.

The Dutch brewer's biggest hurdle will be approval by a "simple majority" of F&N shareholders, the analysts said, noting that ThaiBev now has a 26.2% stake in the conglomerate. But it added: "If ThaiBev wants to block the deal, the stance of Kirin (with a 15% stake in F&N) will be critical, and and we believe that Kirin will reluctantly agree to take the cash and pursue a separate side deal for F&N's non-beer beverage assets." 

Bernstein said strategically it approves of the deal. "Although, Heineken has had to pay a very high price, the deal economics could still be attractive, depending on level of synergies and growth of APB," it added. 

The analysts admitted the transaction "looks pricey" compared to other emerging markets deals and it is even "slightly more expensive" than Anheuser-Busch's bid for Grupo Modelo on an inremental basis. But the note added:  "As is the case with Modelo, Heineken could access 100% of incremental economic benefit for 58% of the equity."

Heineken is set to report its first-half results on Wednesday (23 August).


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