Institute of Certified Management Accountants of Sri Lanka May 2013 Examination
Integrative Case Study (ICS - 405)
Instructions to candidates: The Integrative Case Study (ICS - 405) of May 2013 Examination comprises of two scenarios; Scenario I, Scenario II and the Question paper. Scenario I Scenario I is provided in this web site and has information about the company and industry, on which the question paper will be based. This is not allowed in the examination hall. Scenario II Scenario II is a continuation of Scenario I. Scenario I together with Scenario II will be provided with the Question paper, at the Examination. Question paper The question paper will be of 3 hours duration and will have one question based on Scenarios I and II.
Prospects of Fraser & Neave Limited and Takeover
Southeast Asian companies have become more active in mergers and acquisitions in the recent past. It was the financial news around the world that major shareholders were trying to gain the control of Fraser & Neave Limited (F&N), a well established group of companies mainly in the businesses of food & beverages, Properties and Printing and Publication. Mr. Charoen, a major shareholder of Thai Beverage Public Company Limited (Thai Beverage) showed the interest of acquiring F&N by convincing other major shareholder: Japan's Kirin Holdings company that had 15% stake in F&N. Mr. Charoen's offer price was 4.3% above the closing price of $8.51 when the offer was made. Prior to this, Overseas Chinese Bank Nominees Pte Ltd (OCBC) Group and Lee Rubber Company (Pte) Limited (“Lee Rubber”), other two major shareholders of F&N agreed to sell their combined stake of 22% in F&N at a price of $8.88 and 8.6% stake in Asia Pacific Breweries Limited (APBL) at $45 per share, to Thai Beverage Public Company Limited and Kindest Place Groups Limited respectively. Heineken NV offered $50 per share for F&N’s direct and indirect stakes in APBL and $163 million for non-APBL assets in Asia Pacific Investment Pte Ltd (APIPL) in July 2012. During the month of August 2012, F&N Board announced the recommendation for sale of direct and indirect stakes in APBL to Heineken NV, at an improved offer of $53 per share (Total consideration of $5.6 billion) and non-APBL assets in APIPL for $163 million thus divesting a substantial part of its beer business. APIPL was the 50:50 joint venture company through which F&N and Heineken held their joint 64.8% interest in APBL. The share price of F&N was affected by this tense situation irrupted due to of takeover bids and the changes in other socio economic factors. As a result, market price of shares of F&N fluctuated during the year 2012. Share price of F&N fell as the market digested news of Heineken's final offer to acquire its stake in APBL. Heineken and F&N were the two largest shareholders in APBL. Subsequently, F&N sold its entire 39.7% stake in APBL to Heineken by registering a gain of around $4.8 billion. As a result, Heineken's direct and deemed interest in APBL has gone up to 84.24%. Subsequent to this, Group’s beer portfolio now consists of a 55%-held brewery in Myanmar Brewery Limited (MBL) in Myanmar. MBL manufactures and sells Myanmar’s leading beer brands such as Myanmar Beer, Myanmar Double Strong and Andaman Gold. However, the Myanmar government issued several new beer licenses to other companies in the year thus creating another challenge that would be likely to be faced in future. Hence, a capacity upgrading plan was completed with a new high-speed bottling line installed during the year. In connection with the takeover bid offered by Thai Beverage, other giant investors also launched takeover bids. Accordingly, TCC Assets Limited launched a mandatory conditional cash offer at $8.88 per share of F&N in September 2012 followed by another voluntary conditional cash offer by Union Enterprise Limited (OUE) to buy shares of F&N at $9.08 per share. The battle...