ThaiBev (SGX: Y92) has entered into a share swap with TCC Assets, an entity owned by its majority shareholders to swap its shares in Frasers Property (FPL) (SGX: TQ5) for shares in Fraser and Neave Ltd F&N (SGX:F99).
The share swap will see Thaibev transferring its entire 28.78% stake in FPL in exchange for an additional 41.3% stake in F&N, bringing its total stake to 69.61%.
TCC will see its shareholdings in F&N be reduced to 17.6% and see its shareholdings in FPL increase to 86.89%
| Shareholdings | ThaiBev Pre swap | ThaiBev post swap | TCC Pre swap | TCC Post swap |
| F&N | 28.31% | 69.61% | 58.90% | 17.60% |
| FPL | 28.78% | Nil | 58.10% | 86.89% |
Transaction details
The share swap values F&N at $3.55 per share and FPL at $1.89 per share.
The share swap is subject to approval by independent shareholders in an extraordinary general meeting. This means a 75% approval rate by the independent shareholders is required. The majority shareholders will abstain from voting.
The expected date of the EGM is mid to late September 2024. The circular will be despatched at least 14 days before the AGM.
Should approval be received from independent shareholders, the expected date of completion of the share swap is end September 2024. This is likely because the financial year for ThaiBev and the other entities are all ending on 30 September 2024 and would allow for a clean start in the next financial year.
Key Benefits for Thaibev
The share swap will allow Thaibev to attain a majority shareholding in F&N, in exchange for its 28.78% stake in FPL, with no cash outlay required by ThaiBev.
After the completion of the Proposed Share Swap, ThaiBev will no longer have any interest in FPL and its property business. ThaiBev will transform into a pure-play beverage and food (alcoholic and non-alcoholic beverages (“NAB”)) business, which is supported by the four main pillars of spirits; beer; NAB; and food, allowing it to deepen exposure in high growth segments that F&N currently operates in.
The transaction also strengthens ThaiBev’s position as the #1 company in South East Asia in terms of revenue with an estimated revenue of THB 336 billion(US$9 billion), larger than San Miguel at US$6.9 billion and Indofood at US$4.4 billion.
It will also increase revenue contribution from NAB and Food segments from 14.2% to 26.5%, providing for a more diversified and balanced portfolio. This will make ThaiBev more resilient through economic and product cycles.
F&N also has a greater exposure to Singapore and Malaysia and will decrease ThaiBev’s exposure to Thailand from 72% to 65%.
ThaiBev also believes it can realise operational synergies such as cross selling, rationalisation of infrastructure and distribution networks as well as economies of scale in procurement, supply chain management as well as R&D.
Is the share swap worth it for ThaiBev?
ThaiBev is swapping its FPL stake at $1.89 for TCC’s F&N stake at $3.55. This seems like a good deal when comparing share prices just before the deal was announced.
F&N’s swap price was 3.3 times the last share price while FPL’s was 2.4 times. F&N’s book value was about $2 while FPL’s was about $2.4 F&N’s core businesses were valued at a EV/EBITDA range of 16x to 18x while FPL’s was at a 20-25% discount to RNAV.
As highlighted by ThaiBev, the prices were supported by external valuations. This would also imply that F&N was much more undervalued than FPL due to the lack of liquidity and comparisons to the last share prices is not meaningful as it does not reflect their intrinsic values.
Financially, ThaiBev will see gains. ThaiBev will also see a 4.3% accretion to its earnings per share and an improvement to its key net debt to EBITDA metric from 3.16 times to 3.02 times. However, its debt to equity metric will increase slightly from 0.67 times to 0.70 times.
From a price perspective, ThaiBev currently trades at a EV/EBITDA multiple of 10.4 times and believes that it will see a potential re-rating through its new pure-play status.
How does F&N benefit?
The swap price being substantially higher than last market prices will naturally highlight to investors that F&N is undervalued.
F&N will also benefit from operational synergies as mentioned above. Being the smaller of the two party, we can assume that F&N would have larger operational synergies and opportunities potentials when connected to ThaiBev.
This is probably why F&N’s share price increased by more than 30% after over an hour of trading.
Benefits to FPL?
FPL now has a much cleaner shareholding structure with nearly 87% of shares owned directly by its unlisted shareholder, TCC Assets.
Similarly, a swap price that is substantially higher than last market prices will also make investors aware that FPL is undervalued.
While there is no direct operational benefit, the share swap increases the likelihood of another shareholder transaction, such as a delisting play or by bringing in another equity partner with a capital injection to support FPL’s next phase. Regardless of the options, a shareholder transaction is harder to execute
This is probably why FPL’s share price increased by only 9% after over an hour of trading, much lesser than F&N.
Conclusion – Who wins?
Everyone wins! ThaiBev restructures its profile and now becomes a pure play Beverage and Food company. ThaiBev believes it will be re-rated with a higher valuation as a pure play. Both ThaiBev and F&N also sees opportunities in operational synergies.
For both F&N and FPL, their share price movements speak for themselves. Both companies now have a price point that retail investors can look towards as fair valuations.
Both F&N and FPL also now have a more direct ownership structure that makes strategic sense. F&N is now majority owned by ThaiBev, a company that is in a similar industry while FPL is now majority owned directly by the unlisted TCC which would allow for capial transactions to fund any major developments such as the master development at the Jurong Lake District.
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