Last updated: January 16, 2013 3:16 pm

Singapore regulator calls for F&N auction

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Singapore’s takeovers watchdog staged a rare intervention in the tussle for control of Fraser and Neave, the Asian property-to-drinks conglomerate, by calling for an auction in an attempt to end a stand-off between two rival bidders in Asia’s biggest bid battle.

The move marks a sudden twist in a three-month saga that has seen the two bidders, Thai tycoon Charoen Sirivadhanabhakdi and Overseas Union Enterprise, controlled by Indonesian businessman Stephen Riady, repeatedly extend their respective offers for F&N.

Mr Charoen’s TCC Assets group made a S$8.88 a share offer for F&N in September, valuing it at S$7.2bn. He has also amassed a 34 per cent holding in the Singapore-listed group, whose extensive commercial property interests are among its most attractive assets. F&N also has a large southeast Asian soft drinks business.

Two months later OUE made a S$9.08 a share offer for F&N, valuing it at S$13.1bn. Stephen Riady, whose family’s Lippo Group owns office buildings, shopping malls and retail chains throughout Asia, runs the Singapore-based property arm OUE, which owns a flagship mall on Singapore’s main thoroughfare, Orchard Road.

However, neither TCC Assets nor OUE, acting through a unit known as OUE Baytown, has improved on their offers, leading to a stalemate ahead of a Monday deadline when both offers expire.

Singapore’s Securities Industry Council said: “Given that neither TCC nor OUE Baytown has declared its offer final, such that either offer may be increased or otherwise revised, the council considers that the company’s [F&N’s] shareholders should be provided with certainty to make their investment decisions in respect of the competing offers.”

The council said it had made the move “in the absence of agreement between the parties as to any alternative procedure for resolving this competitive situation, and in order to provide an orderly framework for its resolution”.

The watchdog’s decision to try and ensure a resolution to the bid battle comes as shareholders have been increasingly unnerved by what appears to have been a stubborn battle of wills between two of Asia’s wealthiest tycoons.

“The sum of the parts valuation for F&N is worth well north of S$12 so what I think it comes down to is neither wants to put a bid on the table a cent higher than they absolutely have to,” said Jonathan Foster, director of global special situations at Religare Capital Markets, an investment bank.

Under the SIC’s ruling, each party now has until Sunday to make a revised offer, after which an auction should take place “if a competitive situation . . . continues to exist”, the SIC said.

Both sides could only improve their offers by “unconditionally” raising the amount of cash on offer, with no “alternative form of consideration” allowable.

The SIC said it may impose a final time limit for announcing revised offers under the auction, taking into account representations by F&N’s board, the offers made during the auction and the duration of the auction itself.

The SIC said that both TCC and OUE had accepted its ruling. F&N shares closed on Tuesday at S$9.70.

The watchdog’s move comes after weeks of uncertainty over the fate of F&N, whose future was first thrown into doubt in July last year when Mr Charoen made a bid for F&N’s shareholdings in Asia Pacific Breweries. That move sparked a battle with Heineken over the maker of Tiger beer, which the Dutch brewer eventually won.

Both TCC and OUE’s offers are conditional on the bidders winning control of F&N.

In addition to Mr Charoen’s 34 per cent stake, OUE has a stake of about 15 per cent, most of which is a 14 per cent stake in F&N owned by Kirin.

As part of its bid, OUE joined forces with Japan’s Kirin drinks group in a deal under which OUE would support a S$2.7bn offer by Kirin for F&N’s soft drinks business, which includes the Fruit Tree and Seasons brands in Malaysia and Singapore.

However, Kirin’s ability to secure F&N’s soft drinks business has been complicated by a “fairness opinion” published in late December by JPMorgan, acting as independent adviser to F&N, in which it said that Kirin’s planned offer for F&N’s beverage business was “fair but not reasonable”.

That removes an obligation on the part of OUE to support Kirin’s offer.

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