http://www.straitstimes.com/archive/...ng-question-fn

NEWS ANALYSIS

The burning question for F&N

Published on Aug 07, 2012

By Lee Su Shyan Money Editor


THE suspense over whether Fraser & Neave's board would sell its Asia Pacific Breweries stake to Heineken ended last Friday but the story is far from over.

Attention is now shifting to the next stage in this corporate drama - the F&N shareholders' meeting.

That's where stakeholders ranging from Thai Beverage (ThaiBev), Kirin Holdings and various fund managers and other retail investors have to decide if they indeed want F&N to end its 81-year-long relationship with APB. Investors, large or retail, will have their own different concerns.

ThaiBev and Kirin will consider the strategic merits of selling or retaining their shares while retail investors will consider if selling the stake will benefit the company and how the move will affect them.

A key concern will be how F&N is going to handle the $5.1 billion in proceeds or $5.28 billion if the extra owned by a joint venture vehicle but not APB-related is included.

If F&N distributes all that money back to shareholders, that is certainly a pretty penny.

And if the talk that F&N could next sell off its drinks business - that includes isotonic beverage 100Plus, for example - does materialise, then that would be the icing on the cake.

Equally, instead of winding down its business, this $5.1 billion could be just the ticket to propel F&N as a major property player on the regional and even global stage.

At this point, it is not clear what the F&N board has in mind.

And while it may seem premature to count the different ways one can spend $5.1 billion, for shareholders who need to make up their minds, how the F&N board came to the decision to sell could have a crucial impact on their decision.

On one level, the deal was clearly an attractive offer, possibly too attractive to reject outright. How could F&N have justified rejecting out of hand a suitor like Heinekin with no obvious flaws?

As F&N belongs to its shareholders, it only makes sense that the shareholders should have the final say rather than letting the board make the decision.

Accepting the offer was also one way to avoid antagonising its key partner Heineken. Rejecting Heineken without even asking shareholders to vote could lead to acrimony between the two with negative consequences on the way APB operates and performs.

Perhaps saying "yes" was the only answer since a better offer, either from Heineken or another party did not emerge during the two weeks when the board was deliberating. It was probably better to accept the offer if there was no alternative out there.

Still, these reasons seem more like factors to explain why the board could not say "no". Was there a knock-out reason that clearly spelt "yes" to the offer?

That is not clear. But in the coming weeks, hopefully the F&N board will give more insight into its thinking that led to the decision. They should tell shareholders whether they have mapped out the the vision to take the group on the next chapter of its journey without APB.

That is the only way shareholders can decide whether F&N is indeed, better off without APB than with it.

[email protected]