Market await clarity on OUE's F&N plans

SINGAPORE - The market flew a holding pattern around Fraser & Neave (F&N) and potential bidder Overseas Union Enterprise (OUE) yesterday as investors waited to see if a deal would materialise.

By the end of the trading session, clarity remained elusive, while the net of speculation widened to include a number of banks that were seen to be potential financiers for an OUE bid.

Shares of F&N closed flat at $9.26 yesterday, about 4 per cent above a conditional $8.88 per share general offer by a consortium controlled by Thai tycoon Charoen Sirivadhanabhakdi.

Reuters reported yesterday afternoon that OUE, which announced on Oct 19 that it is talking to parties about a possible rival offer for F&N, has hired Credit Suisse as an advisor and is seeking to raise debt to fund an offer.

Credit Suisse declined to comment.

Banking sources also pointed BT to Malaysian bank CIMB Group, Deutsche Bank and the Australia and New Zealand Banking Group (ANZ) as possible financiers for OUE.

None of the banks commented on the speculation, although the question has almost become who is not involved. At the moment, Morgan Stanley is advising the Thais; Deutsche Bank is advising F&N substantial shareholder Kirin Holdings; Goldman Sachs and JP Morgan were hired by F&N; and DBS Bank and United Overseas Bank are helping to finance the Thai offer.

If it makes a bid, OUE may have to assemble a war chest big enough to trump the $12.6 billion valuation that the Thai offer has placed on F&N. OUE could sell its flagship hotel and retail properties in Singapore's Orchard Road retail district to raise some money, but will still need help.

"We see pricing and funding structure for OUE's bid for F&N's property business as key risks," Standard Chartered analysts Regina Lim and Kai Yip wrote in a report this week. "After the potential sale of Mandarin Orchard and Orchard Gallery and taking on some debt, OUE could then have circa S$2 billion to invest in F&N. However, this would still be insufficient."

OUE shares edged higher by 3 cents, or one per cent, to close at $2.74 yesterday.

The increased chatter about the possible OUE offer reflected market expectations that OUE may need to update the public on its intentions soon, rather than leave investors in limbo.

F&N shareholders would appreciate some guidance given that the Thai offer lapses on Oct 29.

The Thai consortium, comprising Mr Charoen's Singapore- listed Thai Beverage Public Co and privately held TCC Assets, will complete its offer only if it gains enough shares to control a majority of F&N.

The Thais are expected to extend, if not raise, their offer given that their stake stood at just 33.8 per cent as at Oct 17.

Beyond which banks will be involved, the market is also curious about who OUE might partner in a takeover bid.

OUE, a property company, has no obvious interest in F&N's non-trivial food and beverage business.

Market speculation has mentioned a few possible partners: F&N substantial shareholder Kirin Holdings; The Coca-Cola Co, which was rumoured to have been mulling a bid for F&N's drinks business; and Auric Pacific Group, which shares the same parent - Indonesia's Lippo Group - as OUE.

Those parties have been resolute in their silence.

Shareholders of ThaiBev will also meet on Wednesday in Thailand to vote retroactively on its initial July investment into F&N, a move that set off the current takeover saga. But that vote is likely to be in favour of the investment, given Mr Charoen's majority control of ThaiBev.