Company Name: THAI BEVERAGE PUBLIC CO LTD
| Research House: CIMB | Price Call: BUY | Target Price: 0.60 |
ThaiBev’s decision to veto F&N’s capital-reduction plan is strategic, CIMB says. “Although ThaiBev misses the chance to reduce its gearing, we believe this is a positive move as it increases the likelihood that F&N shareholders will accept TCC Assets’ $8.88 offer.” CIMB says.
F&N shareholders must either accept the $8.88/share offer to realise returns or run the risk F&N’s share price will collapse without the capital reduction’s backing if the Thai group’s offer is allowed to lapse. CIMB adds, the Thai group could also be eyeing more of the cash from the APB sale as it would receive only 30.4%, or $1.2 billion, if the capital reduction proceeds.
If the Thais mop up more of F&N or gain control, they would be entitled to a greater portion and could even propose a larger payout, helping finance the F&N takeover, it says. CIMB remains positive on ThaiBev as it will reap strategic benefits if the F&N offer succeeds; “the current share price, even after the run-up year to date, does not fully reflect the value of its spirits business, let alone the full sum-of-parts.”
It keeps ThaiBev at Outperform with $0.60 target. The stock is down 2.4% at $0.415, but remains up around 69% year-to-date.
How does ThaiBev benefit from the F&N deal when the acquisition is made through Charoen Sirivadhanabhakdi's investment vehicle? For ThaiBev to take on F&N, I would suspect that there must be a massive rights issue of sorts to finance the acquisition.
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