What is the news?

A consortium led by OUE Ltd announced that it has made a voluntary conditional cash offer for F&N at a price of $9.08 per share, for a total consideration of $13.1bn. The offer is conditional upon the consortium having received at least 50% acceptances during the offer. Kirin Holdings Company, which holds ~14.8% shareholding of F&N, has irrevocably undertaken to accept the offer subject to certain conditions. Kirin has also agreed to make an offer to F&N to acquire the F&B business of the F&N group for a cash consideration of $2.7bn after the successful completion of the offer.

How do we view this?

We agree that the property assets of F&N are of good quality and could complement OUE’s existing portfolio and expansion plan, nevertheless the eventual successful bidder in such bidding war is at risk of over paying the target in our view. With the current F&N price is trading over the OUE’s offer price of $9.08, we believe F&N existing shareholders are not convinced to accept the offer just yet.

Investment Actions?

We maintain our fair value of $2.83 but downgrade our recommendation from Accumulate to Neutral as OUE has expressed its firm intention of making an offer for F&N. There are currently too many uncertainties to the outcome of such takeover attempt.

Source: PhillipCapital Research - 19 Nov 2012