Winning full control of APB Opportunity or challenge for Heineken in Asian beer markets

1. BUSI 1357-Global Business
Mr. Alan Go
Group 2: TRAN LONG, JIN-XIN,
DO TON MINH KHOA,
BATBAYAR BATTUMUR
MYUNG SUNNA,
WEY CHEN LING,

2. Content
• Background
• Companies Overview
• Context To The Offer
• The Aims Of Heineken’s Strategy
• Opportunities and Challenges
• Conclusion
• Reference

3. • Slowing growth in mature markets - Western Europe and North
America
• Rising costs and the growing popularity of low-carbohydrate
beers and other drinks
Beer manufacturing industry
• In 2008, Anheuser - Busch accepted the offer of $ 52 billion of
InBev → Anheuser - Busch Indev
• In 2011, SABMiller spent a $10.15 billion takeover of Foster’s
Group
The world’s major brewers have to consolidate, employ Global
strategy to capture greater market share and access into
emerging markets through horizontal mergers and acquisitions
Background
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion

4. • Capitalise on a recent event on 28th September -
the Heneiken’s acquisition of Asia Pacific Breweries
• Horizontal M&A trends in global business
Winning full control of APB: Opportunity or
challenge for Heineken in Asian beer markets?
Justification of the Research question
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion

5. • A Dutch brewing company was founded in 1864 by
Gerard Adriaan Heineken
• Europe’s largest brewer and the world’s third largest
by volume
• Presence in over 70 countries, more than 140
breweries with volume of 214 million hectolitres
• In 2011, revenue totaled EUR 17.1 billion and EBIT
was EUR 2.7 billion
Company Overview
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion

6. • A leading brewer in Southeast Asia & the Pacific
Islands
• 25 breweries in 14 countries in the Asia - Pacific
region
• An extensive portfolio of over 40 beer brands.
• In 2011, revenue totaled S$2,974 million and EBIT
was S$658 million.
APB
Company Overview
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion
1931

7. • Thailand's largest and one of the largest beverage
alcohol companies in South East Asia
• 4 segments business line: spirits, beer, non-alcohol
beverages and food
• The owner, Charoen Sirivadhanabhakdi, is the
second richest billionaire in Thailand
• Control 30.7% shares of Fraser and Neave (F&N)
Company Overview
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion

8. Context to the offer
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion
offered to buy 22 % in F&N for
S$2.78 billion
18 Jul 20 Jul 7 Aug 17 Aug
S$5.6 billion offer for the
whole of APB
S$5.1 billion offer for the
whole of APB
KPG (a company link to ThaiBev)
offered for F&N's direct 7.3%
stake in APB

9. Context to the offer
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion
S$8.7 billion offer to take full
control of F&N
13 Sep 18 Sep 25 Sep 28 Sep
Shareholders of F&N agreed
to sell their stake in a beer
joint venture to Heineken
for about S$5.6 billion
Agreed to support Heineken’s bid to gain
control of APB on the condition that
Heineken does not make a counter offer
for F&N
acquired KPG’s shares in APB,
representing 8.6% of the total
issued share capital of APB

10. • Expand geographic coverage with access to emerging markets
• Improve the operation efficiency, increase market share
The Aims Of Heineken’s Horizontal Acquisition Strategy
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion

11. • Strengthen HEINEKEN’s portfolio
The Aims Of Heineken’s Horizontal Acquisition Strategy
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion

12. • A “must-do deal” to prevent a competitor from
emerging markets
Implication
The Aims Of Heineken’s Horizontal Acquisition Strategy
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion
Beer products Non-beer products

13. • Heighten its product differentiation
• Enhance its image with stakeholders - Heineken shares were up
1.2% after the deal
Implication
The Aims Of Heineken’s Horizontal
Acquisition Strategy
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion

14. • Asian – Pacific region is growing on population and economic
Opportunities
Opportunities and Challenges
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion
(Source: The Global Small Business Blog, 2010)

15. • APB knows well about Asian beer markets
• Tiger, Bintang and Anchor of APB are among the most famous
beer brands in Asia
Opportunities
Opportunities and Challenges
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion
(Source: Canadean, Plato , APB, 2011)

16. • Heineken's business in the Asia-Pacific region was
not well-consolidated
• Heineken’s debt ratio increased to 3.3, more than its
target 2.5
• Potential competitors in Asian markets
Challenges
Opportunities and Challenges
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion

17. • Heineken has conducted the global strategy through
horizontal acquisition
• Horizontal acquisition helps the companies improve
their performance on many aspects: brand
expansion, reputation, market share, and profit
• Beside opportunities, there are many challenges for
Heineken - Not all the acquisition is completely
successful
Big lessons
• Analyse data in order to clarify the situation of Heineken and
identify the challenges it may encounter after acquiring APB.
Next step
Conclusion
Background | Company Overview| Offer Context| Strategy’s aims| Opportunities & Challenges| Conclusion

18. Reference
• Cavusgil, S. T., Knight, G. and Riesenberger, J. R. (2012) International Business: The New
Realities. 2nd International Edition. Prentice Hall: New Jersey.
• Danubrata, E. and Blenkinsop, P. (2012) “Heineken wins Tiger battle; focus shifts to F&N
fight” Reuters, 28 Sep. Available at: http://www.reuters.com/article/2012/09/28/us-apb-
shareholders-idUSBRE88R05N20120928 (Accessed: 9 Oct 2012).
• HEINEKEN (2012) Press releases. Available at:
http://www.heinekeninternational.com/pressreleasespage.aspx (Accessed: 9 Oct 2012).
• Marketwatch (2012) “Fraser & Neave holders approve Heineken's APB bid” Marketwatch -
The Wall Street Journal, 28 Sep. Available at: http://www.marketwatch.com/story/fraser-
neave-holders-approve-heinekens-apb-bid-2012-09-28 (Accessed: 10 Oct 2012).
• Morton, A. (2012) “GLOBAL: Heineken's APB deal to pay for itself in five years – analyst” Just-
drinks.com, 1 Oct. Available at: http://www.just-drinks.com/news/heinekens-apb-deal-to-
pay-for-itself-in-five-years-analyst_id108301.aspx (Accessed: 10 Oct 2012).
• Roland, L. (2012) “Heineken Toasts Asia With Deal To Acquire APB” The International Business
Times, 28 Sep. Available at: http://www.ibtimes.com/heineken-toasts-asia-deal-acquire-apb-
797547 (Accessed: 10 Oct 2012).
• Thompson, A. , Peteraf , M.A., Gamble, J.E., Strickland III, A.J. (2012) Crafting and Executive
Strategy – Concepts and Cases. 18th ed. MC Graw-Hill Irwin, New York.
• Wassener, B. (2012) “Heineken Offers $4.1 Billion for Asia Pacific Breweries Stake” Dealbook
– The New York Times, 20 Jul. Available at:
http://dealbook.nytimes.com/2012/07/20/heineken-offers-4-1-billion-for-asia-pacific-
breweries-stake/(Accessed: 10 Oct 2012).