Dutch brewer Heineken took a major step towards winning control of the Tiger beer brand and an Asian brewing network today after a Thai rival accepted the deal.
Billionaire Charoen Sirivadhanabhakdi's Thai Beverage PCL and TCC Assets Ltd said they would vote in favour of the sale of Singapore conglomerate Fraser and Neave's stake in Asia Pacific Breweries Ltd to Heineken.
In return, Heineken, the world's third-largest brewer, will not make an offer for shares in F&N.
The deal between the Thais, the largest F&N shareholders with a near 31 percent stake, and the Dutch brewer ended a two-month standoff involving competing offers for control of APB.
After the agreement, Heineken also said it would buy an 8.6 percent direct stake in APB owned by Sirivadhanabhakdi's son-in-law through his company Kindest Place Group.
Heineken, already sharing control of APB through an 81-year-old venture with F&N, now seems set to take full control of the brewer and protect its turf in Asia's fast-growing beer market.
"This is settlement talk, to prevent any further escalation of the fight for F&N or APB, which will cost more for both parties if it goes on," said Goh Han Peng, an analyst at DMG & Partners Securities in Singapore.
"Heineken would henceforth be able to complete consolidating APB. ThaiBev would get the balance of the F&N business and give it to a platform or distribution channel to regional markets in Southeast Asia."
Once Sirivadhanabhakdi had agreed to support Heineken, it was logical that Kindest Place would also want to sell its part, analyst Wim Hoste at KBC Securities said.
Heineken shares rose as much as 6.4 per cent to €45.585, a seven-week high, and were the strongest performers in the FTSEurofirst 300 index of leading European stocks.
Brokers said Heineken is paying a steep price for a deal with limited synergy benefits or revenue gains, given it is already operating APB's business.
However, likely borrowing costs for Heineken of only about 3 percent and high growth potential means the deal should immediately boost earnings. APB's revenue has risen 49 percent in the past two years.
F&N's board has backed the deal and its shareholders are due to vote on the proposed sale of its 40 percent stake in APB to Heineken at an extraordinary general meeting (EGM) on September 28th.
"With ThaiBev's support, there is much certainty that the sale of APB assets will be approved at the EGM," said a source with knowledge of the matter.
"But the future of F&N will depend on who will be the ultimate owner of the company." F&N's other shareholders such as Japan's Kirin Holdings Ltd will wait for the "fairness opinion" of an independent financial adviser before they decide whether to sell their stakes to Charoen, another source said, declining to be identified because the details of the matter were confidential.
Kirin is poised to make a near 37 percent gain on its investment in F&N shares, bought from Singapore state investor Temasek Holdings Pvt Ltd for S$6.50 a share in 2010. The Japanese company previously said it is interested in F&N's food and non-alcoholic drinks business.