Singapore - Mergers & acquisitions of Southeast Asian firms may gain pace

SINGAPORE: Mergers and acquisitions of Southeast Asian companies may gain pace this year.

With ongoing deals involving Singapore's Asia Pacific Breweries and Indonesia's Bank Danamon, experts said funding is not an issue for cash-rich firms who want to acquire companies to enter high-growth markets in the region.

With SGX-listed Asia Pacific Breweries and its parent F&N becoming takeover subjects and DBS Bank bidding for Bank Danamon, the mergers and acquisitions space in Southeast Asia looks busy these days.

Baker & McKenzie.Wong & Leow's principal for corporate & securities, Andrew Martin, said: "The young demographic of countries like Indonesia and Vietnam is very attractive to companies all over the world and that's going to continue.

"There is obviously strong balance sheets for companies based here, and there's still access to debt financing. The local banks and the regional banks are pretty strong and they're still lending to quality clients."

Recent mergers and acquisitions deals include Suntory's acquisition of Singapore-based tonic maker Cerebos and Thai energy group PTT's buyout of coal miner Sakari.

And with lower liquidity in the stock markets due to risk aversion among retail investors, analysts said it's a good opportunity for major shareholders to take advantage of low share prices and wrest control.

DMG & Partners Research's executive director, Terence Wong, said: "Many a times the break up value of these companies could be say 50 per cent, 100 per cent more than the share price. Many of these companies - the share price has been beaten down over the last few years and they are largely ignored by the market. So the real intrinsic value is a lot higher but very often what these major shareholders would try to do is to really take advantage of this and set a premium that's just 20 to 25 per cent (higher than the current share price)."

Analysts see more deals in the works as firms see mergers and acquisitions as a safer and faster way to expand than through organic growth.

They said, according to DMG & Partners Research, potential takeover targets are Singapore-listed Viz Branz, which makes the Gold Roast brand of instant coffee as well as F&N (Malaysia), which is said to be courted by beverage giants Coca-Cola and Kirin.

- CNA/ck

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