September 28 is judgment day for APB sale

F&N shareholders will vote on the sale during the Extraordinary General Meeting.

Fraser and Neave, Limited has scheduled its Extraordinary General Meeting on September 28, 2012 for its shareholders to vote on its proposed disposal of its interests in Asia Pacific Breweries Limited and Asia Pacific Investment Pte Ltd, and proposed cash distribution of approximately $4 billion to shareholders by way of capital reduction.

On August 18, 2012, the Board of F&N had accepted an improved offer and signed conditional sale and purchase agreements with Heineken International B V, a wholly-owned subsidiary of Heineken N V, to acquire its entire 39.7% interest in APB and other assets in APIPL for a total aggregate consideration of $5.6 billion.

APIPL is the 50:50 joint venture company through which F&N and Heineken hold their interests in APB.

Should shareholders approve this sale to Heineken, they would be asked to vote on the proposed cash distribution of $4 billion, representing approximately 84% of F&N’s gain on disposal. This will be distributed by way of a capital reduction of one for every three F&N shares, at $8.50 per cancelled share.

F&N said this means that a shareholder who holds 1,000 shares as at the record date for the capital distribution will receive $2,805, while maintaining approximately the same proportionate shareholding in F&N after the capital reduction is effected.

The resolution on the proposed disposal of F&N’s stakes in APB and APIPL to Heineken requires approval by a simple majority of shares present and voting at the EGM while the proposed capital reduction requires the votes of 75% of shares present and voting at the EGM.

In its circular issued to shareholders on September 6, 2012, F&N stated that Heineken’s offer presents the best opportunity to immediately realise the value of F&N’s interests in APB and APIPL, given the constraints of the joint-venture structure with Heineken.

F&N Board believes that Heineken’s improved offer represents an attractive premium to historical trading prices and valuation multiples of comparable companies, especially with the limitation of the right-of-first-refusal to Heineken for any divestment of shares in APIPL.

F&N also explained that it chose a capital reduction by share cancellation in order to achieve a more efficient capital structure going forward and will minimise the impact to earnings per share. The proposed share cancellation allows a rightsizing of the Group’s share base with the reduction in earnings post divestment of its interests in APB.

Furthermore, a capital reduction by pro rata share cancellation has the advantage of not disturbing the relative shareholding percentages of existing shareholders.