Heineken faces bid battle for Tiger beer-maker after £2.6 billion offer

By SCOTT REID
Published on 21/07/2012 00:00

HEINEKEN has launched a £2.6 billion counter-strike for the maker of Tiger beer in a move that would see the European brewer grab a greater slice of the fast-growing Asian market, though analysts said it was likely to face a fight.

The Dutch group, which swallowed Scottish & Newcastle in 2008 in a joint swoop with Danish peer Carlsberg, launched its offer for Asia Pacific Breweries (APB) yesterday. It followed a surprise £1.9bn bid earlier his week by a Thai billionaire.

There was also speculation yesterday that Japanese brewer Kirin may make a move in what one analyst called a “three-way” tussle for the Singapore beer company.

The battle for APB comes amid a wave of industry consolidation as global brewers look to buoyant emerging markets to help offset flat sales in Western Europe.

Heineken has so far failed to gain the scale that rivals AB InBev and SABMiller have built in China, the world’s largest beer market by volume, despite acquisitions over the years.

The S&N takeover saw the Dutch firm gain mainly UK-based assets. It then expanded into emerging markets with an all-share purchase in 2010 of the brewing operations of Mexico’s Femsa, maker of Dos Equis and Sol.

Towards the end of last month, the world’s biggest brewer, Anheuser-Busch InBev, agreed a near-£13bn deal to gain full control of the maker of Mexican beer Corona. The transaction saw the group swallow the half of Grupo Modelo it did not already own.

APB’s ownership structure makes it among the most complicated brewing assets to buy.

Heineken’s offer completed a frenetic week for APB and Fraser & Neave (F&N), a Singapore conglomerate whose joint venture with Heineken has a controlling stake in APB.

The action began on Monday when Singapore bank OCBC said it had received a bid for its stakes in F&N and APB, an ownership interest it held since 1948.

Companies linked to billionaire and Thai Beverage founder Charoen Sirivadhanabhakdi emerged on Wednesday as the bidders.

Heineken’s offer is to buy out F&N’s interest in APB. If successful, it would then pay a further sum to buy out minority shareholders.

The key to Heineken’s offer is whether it can convince F&N shareholders, many of them investment companies, to sell their brewing operations.

Nomura analyst Ian Shackleton said: “I think Heineken is unlikely to get APB at this price. Either… Heineken will have to pay more, or we could end up with a bigger break-up of APB.

“That of course would be difficult given the brewers would all want the Indo-China business. In any case, the status quo looks unlikely.”

Jean-Marc Chow, an analyst at Bernstein, added: “Strategically, we like the deal. However, given Heineken’s patchy record of M&A, some investors might be worried that they might overpay.”

Analysts believe that Heineken has less scope for cutting costs.