TRIS Rating Co., Ltd. has placed the company rating of Thai Beverage PLC (ThaiBev) on CreditAlert with “negative” implication. The rating action follows the announcement of ThaiBev on 18 July 2012 to purchase 313.036 million ordinary shares, or 22% stake, of Fraser and Neave Limited (F&N). The F&N shares are currently held by Oversea Chinese Banking Corporation, Great Eastern Holdings Limited, and Lee Rubber Company (Pte) Limited. The acquisition is worth S$2,779.77 million (or approximately Bt70,050 million at Bt25.2 for S$1), and will be debt-financed.
F&N is the biggest beverage producer in Singapore which its business spans in the food and beverage, property development, and publishing and printing. F&N has a strategic investment in Asia Pacific Breweries Limited (APB), a large brewer with flagship brands like Tiger, Heineken, and Anchor. F&N generated sales of S$6,274 million in fiscal year 2011 and S$2,588.6 million for the first six months of fiscal year 2012. Net profit was reported S$1,114 million and S$368.8 million, respectively.
The F&N’s share purchase is expected to strengthen ThaiBev’s business profile, once the company begins to realize the anticipated commercial synergies. However, this debt-financed acquisition will significantly weaken the ThaiBev’s financial profile in the medium term. The debt to capitalization ratio is likely to jump over 50%, compared with the current level at 17.4% as of March 2012.
TRIS Rating expects to resolve the CreditAlert after the transaction is completed and a comprehensive review of the company’s business strategy and financial arrangement can be made. ThaiBev is expected to reduce its leverage during the next couple years. The rating could be negatively affected if the company is foreseen to maintain a high leverage for a longer term. — End
Company Rating: AA
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