Heineken acquisition of APB

December 2012: Heineken acquisition of APB?  Well, it appears to be almost complete.  There remain fewer than 5% of shares that Heineken does not own directly and it is obliged to acquire these in due course.   In fact, just yesterday (4 December) it made a mandatory unconditional cash offer for these remaining shares in APB. The offer is open until 8th January.

Why did Heineken do it?

It was forced into this acquisition following the approaches of Thai billionaire Chareon Sirivadhanabhakdi (owner of Chang brewer ThaiBev) & his family who took significant stakes in both Fraser & Neave and APB itself.  Whatever his true motivations, it proved to be shrewd move, resulting in a healthy windfall for Mr Sirivadhanabhakdi who pocketed significant cash from the dealings and ended up holding more than 30% of F&N.  He then proceeded to bid for the rest of F&N, after which there was a counter-bid from the Singaporean property group OUE and then a subsequent extension of the offer by Mr Sirivadhanabhakdi’s TCC group.  Knowing how the Singporeans like to keep things tidy, it’s likely there will be resolution before Chinese New Year.

As an aside, it is notable that Kirin Holdings Co Ltd, which is F&N’s second-biggest shareholder holding almost 15%, has given its conditional support to the OUE group. Kirin has proposed that it will buy F&N’s food and beverage business if the OUE group’s bid is successful.  Kirin’s interest in SEA is of course also reflected in their 48% stake in San Miguel’s brewing arm.  http://pomegranate.asia/w/2012/06/the-breweries-in-vietnam-focus-on-san-miguel-with-a-wee-glimpse-at-kirin/#.UL6rOuSsiSo. Watch this space.

What does it mean for Heineken in the region?

Heineken’s CEO Jean- Francois Van Boxmeer said that now that it has acquired APB, Heineken expects the region to represent about 15% of profit, up from 6.5% according to Heineken’s 2011 annual report.

What does this all mean for the Vietnamese beer market?  Well it’s likely that the local consumers take little or no interest in the ownership structure of APB.  One foreigner is pretty much the same as another.  Furthermore, it is unlikely that Heineken will seek to change the terms of their operations in Vietnam, notably the association with SATRA.  Therefore from a corporate perspective, we would anticipate little or no change.

Operationally, there will be the inevitable changes to align with global procurement policies and probably a few people moving chairs within the business. 

Our feeling is that the biggest changes will be in the realm of brand focus.  Tiger was always APB’s lead brand and as such probably got a greater representation at budget allocation time than it perhaps deserved, vis-à-vis Heineken.  

Ironically, this probably helped in Vietnam where an over-reliance on promotions has weakened Tiger’s brand equity.

In Tiger’s home market of Singapore, where APB have been bleeding share, in particular to Carlsberg, it’s likely that Tiger will be repositioned downwards pricewise, leaving Heineken in the premium space and giving Tiger the opportunity of a fairer fight with price-sensitive Singaporeans.

Heineken acquisition of APB
Singapore beer fridge

Of course, such a strategy would not be advisable in Vietnam, where the consumer wants to be seen to be spending more.  APB seem to have understood this for a long time, unlike SABMiller who only seem to have taken this on board very recently.

We would surmise that with Heineken’s global brand focus, whilst there may be more focus on Tiger globally as a secondary brand, the likelihood is that the Tiger brand is likely to reduce its spend throughout the region in favour of Heineken. 

Whatever the case on specifics, the acquisition of APB certainly puts Heineken in an excellent position to grow in Asia’s fast developing markets.  

Not such a bad position to have been forced into.

 

Next week we’ll be publishing another article in the same vein, regarding Carlsberg’s recent approval to increase its stake in Habeco. so please come back for that.

Please also feel free to contact us for more information.

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