Heineken: Kirin looking to increase stake in F&N/APB

Overseas-Chinese Banking Corp and its insurance subsidiary Great Eastern Holdings appear to have received a bid for their 18.2% stake in Fraser & Neave (F&N) and their 7.92% stake in Asia Pacific Breweries, currently valued at around € 1.36bn and € 435m, respectively. The bidder is unknown but is rumoured to be Japanese Kirin, which already holds a 15% stakein F&N. Fraser & Neave issued a press release to comment that discussions are ongoing.

Note that Heineken and Fraser & Neave each hold a 50% stake in Asia Pacific Investment Pte Ltd, which holds a 64.81% stake in Asia Pacific Breweries (APB). Furthermore, Fraser & Neave holds a direct 7.26% stake in APB and Heineken holds a 9.49% direct stake. The remainder (18.44%) of APB is listed on the Singapore Stock Exchange.

APB has an interest in 24 operating breweries in 14 countries in South East Asia, and is the largest brewer in Singapore, Malaysia, New Caledonia, Indonesia, Papua New Guinea and the Solomon Islands. APB is number two in Vietnam, Cambodia, Sri Lanka, New Zealand and Mongolia. APB generated close to € 400m EBIT in 2011.

Our view:
Bottom line is that we believe Kirin might be interested in increasing its stakes in F&N in an effort to reduce dependency on the sluggish Japanese beverage market. Most likely such a move would not have implications for Heineken and the APB operations. However, we would not be surprised if Heineken would be also interested in bidding for OCBC’s stake in APB (as stated above currently valued at € 435m). No major impact on our investment case on Heineken however.

We stick to our BUY rating and € 50 target price.