Will F&N finally be split in three?

Kirin’s investment spurs talk that property arm may be hived off and it is certainly strong enough to stand on its own

The entry of Kirin Holdings, one of Japan’s largest brewers, as a strategic shareholder of Fraser and Neave (F&N) is making many observers once again ponder the likelihood of a split of the local conglomerate into three units – or at least for F&N to hive off its property arm as a separately listed entity.

This follows a statement by the Japanese beer maker of its eponymous brand that it was not really interested in the property business of F&N, and that it would be focused on the food and beverage sectors.

In a teleconference just after its purchase of the 14.7 per cent share in F&N from Temasek Holdings, Kirin said: “Since half of F&N’s business exposure is in the property business, which is unrelated to the beverage business, it is hard for Kirin Holdings to consider acquiring a majority stake in F&N. Hence, we determined that it is best to proceed with a minority share acquisition.”

Kirin’s managing director Hirotake Kobayashi and general manager for strategic planning Ryoichi Yonemura added that it would consider making additional investments in F&N only if it was not allowed to equity-account its stake in the Singapore listed company.

And, as Kirin said, the main purpose of the acquisition was “to expand our soft drink business in the region”.

So, will F&N spin off its property business?

One has to remember that less than a decade ago, F&N’s three main divisions – food and beverage, property, and publishing – operated as separately listed companies.

Then, just after the new millennium, the company decided to privatise the property and publishing businesses and mesh them into F&N.

They were brought together because, as then chairman Michael Fam said: “The privatisation of (Frasers) Centrepoint and TimesPub (Times Publishing) is aimed at restructuring F&N into a stronger and more flexible group, to further enhance shareholder value and sustain long-term growth.

He added: “F&N, as an entrepreneurial shareholder in these companies, already plays a proactive and pivotal role in charting the strategic directions of these businesses. The privatisation of Centrepoint and TimesPub will give (F&N) more flexibility in managing their resources.”

Three years ago, the group decided to rethink its strategies and thought was given to splitting up the units into separate listed companies, as some felt that the sum of parts would be greater than the whole.

This led to a clash between then chief executive Han Cheng Fong and F&N’s board, eventually causing the departure of Dr Han from the group.

Many, including some analysts, felt that the publishing unit, whose performance had been relatively poor, was a drag on the group’s share price and should be hived off or sold off altogether.

While things have been relatively quiet since then, the decision not to have a group chief executive to replace Dr Han must have led many to think that F&N is going to revive its plan to once again split the company into its three component divisions.

But with Kirin now on the scene and with its lack of interest in properties, this line of thinking may gain greater momentum.

By itself , Frasers Centrepoint is a formidable company, having achieved revenues of $1.84 billion and pre-tax profits of some $526 million last year.

Between January and September last year, it sold over 1,800 homes in Singapore and over 550 homes overseas in its key markets of China and Australia.

According to its chief executive Lim Ee Seng, Centrepoint will have a total pipeline of nearly 3,000 homes, both new and existing launches, this year.

It also has a substantial land bank of over 30 million square feet, including two million square feet in Singapore.

For the first six months to March 31 of its current financial year, property earnings swelled 89 per cent to $288 million on the back of a 57-per-cent surge in revenue to $893 million.

Apart from residential properties, Centrepoint’s real estate portfolio also includes a commercial properties division with both office and retail entities, which generates steady rental income.

It has two real estate investment trusts – Frasers Centrepoint Trust, which is in the retail space, and Frasers Commercial Trust, which is in office and business space. In addition, there is Frasers Hospitality, which operates serviced apartments throughout the world under various brands.

This places it among the top half dozen property companies on the island and should therefore it should have no problem standing on its own feet given its sizeable and diversified asset base.

Source : Today – 13 Aug 2010

Join The Discussion

Compare listings