Nearing last call for brewery dispute

The long-running ownership dispute between Singapore-listed Fraser and Neave and local military-linked conglomerate Myanma Economic Holdings Limited (MEHL) is reaching its end, as the two sides have agreed to proceed with the sale of shares in Myanmar Brewery later this month.

Fraser and Neave will sell its 55 percent stake in Myanmar Brewery for US$560 million to MEHL by August 20, according to press statements issued by both sides yesterday.

The brewery is Myanmar’s largest, making Myanmar Beer and Tiger Beer under contract for the domestic market.

The market has been tightening, however, with Carlsberg and Heineken both opening local breweries this year.

The ownership dispute over Myanmar Brewery had been running since at least 2013. It stemmed from the sale of a controlling stake in Fraser and Neave in 2012.

In August 2013, MEHL started an arbitration case in Singapore, claiming its right of first refusal on shares in the brewery had been ignored with the 2012 sale.

Arbitrators in October last year upheld MEHL’s right to buy the 55pc stake in the brewery that it did not already own. An arbitrator subsequently valued the 55pc stake at K500 billion, though the two sides disagreed on the exchange rate that should be applied.

MEHL had favoured an exchange rate from the day before the sale takes place this year, which would mean it would have to pay about $400 million. Fraser and Neave’s position was that an exchange rate from April 2013 should be used, which values the stake at $560 million.

On July 29, MEHL filed an application for an interim injunction in the Singapore High Court requiring Fraser and Neave to transfer its stake using an exchange rate from the day before the transfer, meaning MEHL would end up paying around $400 million instead of $560 million.

The application was subsequently heard and dismissed on July 31.

Yesterday, both Fraser and Neave and MEHL issued press releases saying the sale would go ahead at $560 million, supporting Fraser and Neave’s position on the value of the brewery.

The arbitrational tribunal had ordered the sale be completed by August 20, according to the press release from MEHL.
Myanmar Brewery has an enviable market position, with estimates putting its current market share at about 75pc – though this may drop with competition.

Nelson Nyein, partner at First Rangoon Company consulting, said that Myanmar Brewery will remain a market leader for some time.

“It has great distribution networks – in Chin State, you can get a Myanmar Beer – and having great distribution networks will be difficult for Heineken or Carlsberg in the two- to three-year time frame,” he said.

Nelson Nyein said that MEHL is the net winner and Fraser and Neave the net loser in the transaction. “[Myanmar Brewery] has been persistently called a ‘crown jewel’ for [Fraser and Neave],” he said.

He added that the deal is fair at $560 million, though in an open market transaction and taking into account recent beer industry transaction multiples, the stake in Myanmar Brewery could be worth more.

Source: Myanmar Times

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