Thursday, August 2, 2012

Any bidder (especially Coke) is good for F&N Malaysia

My previous article on F&N is getting it tougher with Coca-cola going alone may not create friends, as there are quite many who loves the stock. I do as well since now I hold ICap who has F&N as stakes in the closed-end fund.

The latest to join in the fray to acquiring some bits of F&N is Coke itself - once a friend, now an enemy. The piece by Bloomberg is quite comprehensive as well as tells that Coke is only interested in F&N's soft drinks business - which I think could be very true. Now with the multiple parties interested in different bits and pieces of the business, it tells that there is a huge potential, F&N may be split. Its brewery business is seemingly important for Heineken, Thai Beverage. Kirin is reportedly interested in the soft drinks and dairies businesses - to me a surprise.

How do I see it? Coke is interested in the soft drinks business, which is similar to thoughts from Bloomberg's reported piece. 100 Plus is valuable. Others not so much but it will help Coke to eliminate competition such as the F&N's branded fizzy drinks. I however feel that Coke will be buying it at a fair price or maybe a slight premium. Remember, Warren Buffett used to chair the company (he does not control) and he had used before his power or influence to reject Coke's purchase of Gatorade because of price (at that time, controlled 90% of the sports drinks business in US). Of course now, Gatorade is owned by Pepsi.

That DNA I feel is planted into Coke until today, and I do not think that Coke will purchase at a overly high price. One of the reason they are interested is because since parties are interested in mainly the brewery business, the soft drinks piece is up for grab at a much attractive price. Buyer like Heineken may opt for partners as they may be interested in the beer business alone.

In any case, if F&N is up for sale (and seemingly it is), it might as well sell all the food and drinks business as keeping any single one (i.e. either beer, dairies or soft drinks) is not helping its cause. The only one they probably can hold onto is the property arm (where Singapore is bigger - for now).

Now I am wondering who is interested in the dairy business besides just pure investors?

I am wondering why is it that F&N Singapore is suspended while F&N Malaysia is not as at today.


Anonymous said...

No official bid for F & N Malaysia yet, cannot suspend. Anyway, F n N Singapore and APB only suspended at a much later date even though rumors were flying around of the big transaction of F&N Singapore by Thai Beverage. Let's hope Coke will not do a general offer and rather let the existing F&N Malaysia shareholders participate in the growth of the new company lead by Coke. Imagine the profit if 100 Plus would to be sold globally by Coke!

felicity said...

It may go on a different route. Let a partner do the privatisation. Coke buying the soft drinks asset.
Yes you are right that 100 Plus can be a brand that is beyond Malaysia and Singapore. I do not see any of their sports drinks (Powerade) doing well in this region. Hence in that sense 100 Plus can be of something valuable if they promote it well.

If Coke is to offer, they will do a GO as I have not seen them holding several listing status before.

Anonymous said...

F&N has agreed to Heineken on the offer for APB for Sg 50.00. Looks like F&N Msia is set to be sold as well.

felicity said...

I do not think it is the same deal. Like in my article, different parties are interested in different assets of F&N. As much as I would love to see F&N's shares going up, I think most of it are speculations.

Anonymous said...

What I meant was F&N Singapore will split up the food and beverages after selling the APB shares as they will now concentrate on property. That means to say there is a higher chance that they will sell off the F&N Malaysia. There will be buyers who are interested, be it Kirin, Coca Cola or Thai Bev. Let's hope that there is bidding war!

felicity said...

I certainly hope that there is a bidding war hence there is a direct investment into the country. However, there are anything concrete as all these are rumours for now.

Anonymous said...

F&N Third Quarter Results out. Perform fairly well if base on the revenue but the profit generated is disappointing especially for soft drinks segment. Dairies in Malaysia and Thailand have done well. Any comments?

felicity said...

Looking at the results, it is what I expected although I seldom do projections as there is no need to.
moving forward, I feel that the dairies segment may be even more significant than the soft drink business.