FNN / OUE / Thai Bev

FNN / OUE / Thai Bev: OUE has decided NOT to revise its offer price of $9.08 for FNN, leaving it out of the running race. Key reasons cited include a significant increase in offer price needed to acquire a 50% stake as well as the recent property measures which could negatively impact FNN’s property business. The long drawn FNN bidding war now looks set to close. With no competing offer, Nomura believes investors are likely to accept TCC’s $9.55 offer. Although TCC’s offer is below Nomura’s fair value estimate of $10.48, it believes most investors will likely accept TCC’s offer, which closes 4 Feb. The swing factor however lies with Kirin, which currently holds a 14.8% stake in FNN. The Japanese brewery said it has not come to a decision on what to do with its stake yet. The TCC consortium now holds a combined 40.45% stake in FNN (Thai Bev owns 28.64%, TCC holds the rest). Once the offer becomes conditional (ie. TCC needs to acquire >50% control), it will provide clarity on the future of FNN’s business units as TCC decides how to restructure its existing business, eg. integration of the F&B operations with FNN, and leveraging on FNN’s regional and global property franchise. Should FNN eventually inject its F&B business into Thai Bev via a share swap of the FNN shares that Thai Bev owns, this could pave the way for Thai Bev to be one of the mammoth F&B operators of the region, in terms of both product portfolio and geographical reach. Thai Bev currently trades at just 16.9x P/E, vs smaller peers like Yeo Hiap Seng at 25.5x. On FNN, CLSA downgrades to Underperform with TP $9.68. Advises to take profit at these levels, as the competitive situation has come to an end. Adds, while further value creation is possible with restructuring, this will take time to crystallize value and the co is better suited for investors with longer invmt horizon. In the near term, mkt watchers expect FNN to fall toward TCC’s $9.55/sh offer price.