- According to a Bloomberg article, US-based Coca-Cola Co. is exploring a bid for Fraser & Neave Ltd's (F&NL) dairy and soft-drinks businesses.
- Though no formal proposal has been made by Coca-Cola Co., the group is believed to be keen and is monitoring potential M&A actions by other suitors, especially Japan-based Kirin Holdings Co. which owns a 15% interest in F&NL.
- F&NL owns 56.3% equity stake in Fraser & Neave Holdings (F&NH). Based on the last closing price, F&NH has a market capitalisation of RM6.9bil.
- F&NH is essentially F&NL's non-alcoholic F&B arm. As at 1QFY12, soft drinks accounted for 77% of F&NH's group EBIT while dairy operations made up the balance of 23%. However, F&NH's 13 acre property development project in Petaling Jaya, Selangor with an estimated GDV of over RM1.3bil is expected to start contributing to group earnings from mid-2013 onwards.
- The article also cited a different source highlighting that a proposal by Coca-Cola Co. may be dependent on roping in a partner to take in F&NH's line of tonics and mixers. Within the soft drinks division, F&NH's star performers include its proprietary 100Plus isotonic drink, range of Asian still drinks and FruitTree juices.
- Meanwhile, Thai Beverage Limited (ThaiBev) had boosted its stake in F&NL from 22% to 24.1% via open market purchases since obtaining a waiver on 31 August from SGX to hold an EGM on its recent acquisition from Oversea-Chinese Banking Corporation Ltd (OCBC) and partners.
- Separately, F&NL is expected to respond to Heineken NV's SGD5.1bil defensive bid for full control of its 40%-owned Asia Pacific Breweries (APB Sp Equity, Non-rated) by tomorrow.
- No change to our Hold rating on F&N with a DCF-based fair value of RM18.10/share, pending further developments.