Why Fraser & Neave will likely reject Thais' bid

F&N could trade higher than the S$8.88/share offer till the general meeting , says CIMB.

TCC Assets Ltd, a related party of Thai Bev, has made a Mandatory General Offer for F&N at S$8.88 a share or US$7.16bn for the remaining 69.7% stake it does not already own. The offer price represents a 4% or so premium to F&N’s last closing price.

According to CIMB analyst Donald Chua, the offer is not convincing and runs the risk of being voted down by the F&N board.

Here's more from CIMB:

At S$8.88, F&N is being valued at a 23% discount to its post-capital reduction SOP and a 38% discount to its property RNAV. Whether other major shareholders like Kirin (estimated 14.92% stake) and Eastspring (7.4%) will accept remains unclear.

We would be surprised if they do. The timeline leading up to the EGM for APB’s sale is also very tight. The earliest TCC can dispatch its offer document is on 27 Sep, one day before the EGM.

From now till then, we believe TCC will try to mop up as many F&N shares as possible from the open market If the board rejects its offer and the market begins to speculate on the potential of higher bids from TCC, F&N could
trade higher than S$8.88 till the EGM, thus restricting TCC’s share accumulation.

The downside from any rejection by F&N shareholders is that even if APB were sold to Heineken, TCC could still vote down the proposed capital reduction as this exercise requires 75% approval from shareholders present and voting at the EGM (TCC/Thai Bev currently owns 30.36% of F&N).

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