2 reasons behind ThaiBev's aggressive acquisitions

It started with Wrangyer and Oishi in 2008, Serm Suk in 2011, and now a 29% stake in F&N.

According to CIMB, this is a much newer business than its decades-old spirits and beer businesses. It was born out of a series of acqusitions, beginning with Wrangyer and Oishi in 2008, Serm Suk in 2011, and now a 29% stake in F&N.

Here's more from CIMB:

The decision to enter this business was motivated by a desire to: 1) broaden its revenue base so that earnings are held less hostage by government taxes; 2) profits from a ballooning non-alcoholic beverage market. A lack of advertising  restrictions here means that management can communicate the group’s products easily which facilitates its market entry 

Thai Bev recently purchased a 29% stake in F&N from OCBC’s Great Eastern, the Lee Rubber Company, the open market. Kindest Place’s, a related party of Thai Bev, also acquired 8.6% of APB from OCBC, Great Eastern, and Lee Rubber.

The total consideration was S$3.62bn, or S$8.77 a share. This valued F&N at 1.7x P/BV. Thai Bev went on to announce a S$2.8bn loan secured to  finance its investment. We believe the rest of the S$0.8bn will also be debt funded.

We are highly positive on this investment as we believe F&N can boost Thai Bev’s profile and branding in the non-alcoholic space. Conversely, Thai Bev could make use of F&N’s distribution channel in markets outside Thailand for its alcohol products as well.

As Thai Bev’s non-alcoholic beverage business is currently purely domestic, this investment will give it a distribution presence in Singapore, Malaysia, and Brunei. In addition, there exist potential avenues for collaboration in product development with F&N and Kirin.