Additional reporting by Eveline Danubrata and Saeed Azhar
Drew & Napier is advising a group led by Singapore property firm Overseas Union Enterprise Ltd (OUE) on its S$13.1 billion ($10.7 billion) bid for Fraser and Neave Ltd (F&N), challenging a takeover offer for the conglomerate from Thailand's third-richest man.
The Drew & Napier team representing both OUE and the special purpose vehicle OUE Baytown is being led by directors Gary Pryke and Ralph Lim. Stamford Law Corporation, led by partners Min-tze Lean and Lian Seng Yap, is advising F&N.
The counter-bid, if successful, could transform OUE into Singapore's No.1 listed residential developer in the largest-ever M&A deal in Southeast Asia. The F&N board has yet to recommend the bid to shareholders, the biggest of which are firms linked to Thai billionaire Charoen Sirivadhanabhakdi including Thai Beverage PCL and TCC Assets Ltd.
Charoen, looking to enlarge his property and beverage empire in Southeast Asia, is likely to raise his S$8.88-a-share offer in response to the S$9.08-a-share bid announced by OUE last week, analysts said.
"OUE's offer is likely to be the first salvo in this fight," Jit Soon Lim, head of Southeast Asian equity research at Nomura, said in a note to clients. "TCC is likely to counter offer as it will want to defend its interest in the group."
Charoen is contending with one of the region's most powerful tycoons - Stephen Riady.
Riady is the chairman of OUE as well as Hong Kong-listed Lippo Ltd, which owns a majority stake in the Singapore firm through its subsidiaries. He is also the president of Indonesia's Lippo group of companies founded by his father Mochtar Riady.
OUE said in a statement on Thursday that it has secured conditional support from F&N's second-biggest shareholder Kirin Holdings Co Ltd to bolster its chances of victory.
Kirin, which owns around 14.8 percent of F&N, will offer to buy the conglomerate's food and beverage business if the consortium's bid was successful, according to OUE. The Japanese brewer was not listed as part of the consortium in the statement.
BRIDGE LOANS
OUE is bringing out the big guns to gain control of the 129-year-old F&N, which manages thousands of serviced resident apartments in cities like London, Paris, and Dubai.
The conglomerate's S$8 billion property portfolio also includes retail malls, office towers and high-tech business parks in Singapore, Australia, and Japan.
"All are good assets," Stephen Riady told Reuters on the sidelines of a conference on philanthropy held by Credit Suisse at the National University of Singapore (NUS) on Friday.
They complement those owned by OUE, he said.
Credit Suisse and Bank of America Merrill Lynch are underwriting a bridge loan for the counter-bid, sources with knowledge of the matter said, while CIMB is also providing some financial support to OUE.
The bridge loan will be around $8.5 billion to $10.5 billion in size, making it one of Asia's largest bridge financing deals, other sources familiar with the matter said, declining to be identified because they were not authorised to speak to the media on the subject.
The bridge loan will have a 12-month maturity, and the bulk of it will be repaid from the proceeds generated from the sale of F&N's beer, food and beverage businesses, the sources said.
Dutch beer giant Heineken N.V. agreed in late September to buy F&N's stake in Tiger beer maker Asia Pacific Breweries Ltd (APB) for S$5.6 billion. OUE said Kirin has agreed to acquire F&N's food and beverage business for S$2.7 billion if the counter-bid was successful.
The counter-bid was placed by a consortium that includes investment funds and accounts managed by Farallon Capital Management L.L.C. and Noonday Global Management Ltd.
"These guys are prepared for the long-drawn (battle) unless the Thais give a knockout offer," a source with direct knowledge of the matter said about OUE's bidding strategy.
Shares in OUE rose 4.3 percent in Singapore trading on Friday, while F&N advanced more than 2 percent to S$9.33, indicating the stock market is expecting an even higher offer.
Shares in Kirin declined 3 percent in Tokyo.
CHAROEN TO FIGHT BACK
The S$9.08 counter-offer values the company near the middle of the S$11.9 billion-S$16.1 billion range estimated by F&N's independent financial adviser J.P. Morgan.
In an unusual move, F&N agreed to pay a break fee of as much as S$50 million to OUE to create a competitive bidding environment to maximise value for shareholders, the Singapore conglomerate said in a statement early on Friday.
If recent history is any guide, Charoen is likely to put up a strong fight. Earlier this year, the Thai billionaire forced Heineken to raise its offer to get control of APB.
Charoen, through TCC Assets and Thai Beverage, made a $7.2 billion bid in September to purchase shares of F&N that he did not already own, valuing the Singapore conglomerate around S$12.8 billion.
The Thai group has a 33.6 percent stake in F&N, and can acquire another 2.8 percent from shareholders who accepted its offer. The offer is conditional on the group obtaining majority control of F&N.
Ranajit Dam is Southeast Asia Editor at ALB. Follow us on Twitter: @ALB_Magazine.
