F&N bids to maintain presence in Myanmar

Fraser & Neave is studying ways to maintain its presence in Myyanmar, after losing the brewery row involving Myanmar Brewery Ltd (MBL).

In a statement to the Singapore Exchange on October 31, the company said it and Thai Beverage, a major shareholder, would ensure that it remains in the Myanmar market, which still has great growth potential and remains a keen interest to the group.

The company said that it is currently reviewing options and will make further announcements, which will include the financial impact from the case as soon as possible to update shareholders.

MBL makes the country's best-selling Myanmar Beer. Owned by Myanma Economic Holdings Ltd (MEHL), a military company which has a vast range of businesses.  The company  welcomed F&N as a major shareholder.

 "F&N ventured into Myanmar in 1995, at a time when many investors shied away. We backed our belief in Myanmar and our partner with major investments, not only in assets but also in its people. Today, MBL is one of the largest, most profitable and highest tax-paying companies in Myanmar, with senior management, consisting of Myanmar nationals ,whom F&N groomed over the years. In addition, the group has also taken an active role in the support of the local community through projects such as Operation Smile, various vaccination and blood donation porgrammes and scholarships," said Huang Hong Peng, chief executive officer for beer business.

MEHL last year launched an arbitration seeking to compel F&N to sell its 55 per cent stake in MBL to the company at a price of US$246 million. The row centred on MEHL's claim that F&N had breached a condition of their joint-venture agreement when the ownership structure was changed after Thai billionaire Charoen Sirivadhanabhakdi had taken the Singapore-based group last year.

On Friday, the arbitral tribunal ruled that MEHL had the right to buy the stake. Yet, the price must be redefined by an independent valuer. The dispute emerged  in August 2013.

Huang said that the tribunal's decision to set aside MEHL's valuation and to order that a fresh valuation be done is a vindication of F&N's position. The company insisted that the cost of $246 million was too low, only approximately 7.5 times the earnings of MBL.

"F&N believed and continues to believe that MEHL's price did not take into account, among other things, MBL's leadership position in the Myanmar beer market, and at a time when MBL's profit is growing at a phenomenal rate of nearly 50 per cent over the last year," he said.

F&N said that it was disappointed that this dispute has arisen, at a time when Myanmar is opening its market, and is on the cusp of the introduction of international beer competitors.

It also noted that under a roadmap drawn up in the last 18 months, F&N is positioned to strengthen its food and beverage business in Asean.

While market positions in Singapore, Malaysia and Thailand will be strengthened, the plan also highlighted the expansion into other countries, in particular Vietnam, Myanmar and Indonesia in the next three years.

"The goals of both F&N and ThaiBev are aligned, with great enhancement to F&N's position as one of Asean countries' leading food & beverage companies," said Huang.

MEHL, dubbed a military company, issued a statement on the same day, ensuring foreign investors of transparency in the case. 

"It is very important for Myanmar that foreign investors have confidence in the way we do business," MEHL deputy managing director Myint Aung said in the statement issued last Friday.

"The conduct of this arbitration shows our commitment to the rule of law and that we will always adhere to due process," he added, stressing that the legal process had been held in Singapore in agreement with F&N.