2 possible reasons behind Thai Bev and TCC Assets' nay-vote

Though Thai Bev misses the chance to reduce its gearing, find out why it's still a positive move.

According to CIMB, Thai Bev/TCC Assets will vote against the capital reduction at F&N’s EGM on Friday. Although Thai Bev misses the chance to reduce its  gearing, this is a positive move as it increases the likelihood that F&N shareholders will accept TCC Assets’s S$8.88 offer.  

Thai Bev/TCC Assets announced that they will vote against the proposed capital reduction at tomorrow’s (28 Sep) F&N EGM.

Here's more from CIMB:

We believe this is a strategic move. The move might seem strange as Thai  Bev can receive S1.2bn proceeds and bring down its current 1.4x net gearing to 1.0x. Voting down the  move is a negative for de-gearing but  we believe there are two possible motivations behind the nay-vote. 

First, Charoen could be trying to  ‘force’ shareholders into accepting his S$8.88 offer. With Thai Bev/TCC  Assets’s vote against the capital  reduction, F&N shareholders are left  with accepting his S$8.88 offer to realise returns or run the risk of F&N’s share price collapsing (without the backing of a capital reduction) if they let his offer lapse.

This could encourage F&N shareholders to accept his offer when the offer documents go out soon.

Second, Charoen could be eyeing a greater portion of the cash from the APB sale. If the capital reduction goes through today, he stands to receiveonly 30.4% of the cash (S$1.2bn).

However, if TCC Assets successfully mops up more F&N shares or gains control over F&N, he will be entitled to a greater proportion of this cash and could even propose a larger payout, which would go some way in financing the F&N takeover.