DB majority owner 'happy' with 75pc shareholding

By DITA DE BONI

DB Breweries majority shareholder Asia Pacific Breweries says it is in no hurry to buy the almost 25 per cent of DB not already in its control.

While stock market analysts are writing obituaries for the listed company, APB says it will not make a better offer than 280c a share now that Corbans is to be sold to Montana Wines.

Remaining shareholders and analysts alike have wondered how long it would be before APB went back to the market after selling Corbans to Montana for $151 million on September 20.

It is widely believed that APB, which has stakes in 15 breweries throughout the Asia Pacific region, prompted DB to quit the wine business after a series of less than sparkling results from its Corbans division, leaving the brewery free to be subsumed into the APB network.

But Siep Hiemstra, APB's regional director, said from Singapore last week that it was up to shareholders to decide whether APB gained 100 per cent control of DB.

He said the company was "not in a hurry to start up the process again."

"We would like to have a bigger share of the company, of course. That's why we tried to get 100 per cent previously.

"But we have no indication that people would answer differently to us if we asked again.

"In terms of value, our view is that at that stage the price we offered [280c] was fair value, and we feel not much has changed since.

"We don't have dramatically different views on value."

In January, APB attempted to move from its 58.4 per cent in DB Group, as it was then known, to 100 per cent with the offer of 280c a share. Shareholders taking the offer were also entitled to retain an 8c dividend on acceptance.

But an independent valuation of the offer by PricewaterhouseCoopers deemed APB's offer "not fair," based on "underlying market values" of the group's two main business units, Corbans and DB Breweries.

APB refused to sweeten its unconditional offer. It said Pricewaterhouse's appraisal of a value between 319c and 361c for the company was almost 100c above DB's weighted average share price of 228c for the six months to February 2000.

Almost 25 per cent of shareholders retained their shares, including United States-based Palo Alto, which jumped into the fray in April when it tried to take a blocking stake in the company for 285c, just before the APB bid closed.

As predicted by both Pricewaterhouse and APB, DB's share price suffered immediately after the bid closed.

But the stock's value lifted on news that Corbans would be divested, especially after the division turned in a "below expectation" result in the first half of the financial year.

The share price has since climbed as high as 331c, closing on Friday up 8c at 325c.

Ord Minnett's Arthur Lim said the die-hards might yet be rewarded for their stance against APB's 280c offer. "You could justify a [higher valuation] now, perhaps closer to what the shares are trading at."

Apart from disclosure requirements, APB would save about $500,000 a year by removing DB from the local stock exchange.

But Warren Doak of Deutsche Bank said that while the price DB had realised for Corbans was above appraisals, "on balance, you would expect an offer close to the current one."

Analysts agree that in a mature beer market, DB Breweries will need to concentrate on premium brands and export opportunities, possibly the export of New Zealand-brewed Heineken into Australia.

Mr Hiemstra would not speculate on exporting Heineken, but said the company was very effectively marketing a big range of "great brands" to the New Zealand public and had raised its market share in the past year.

DB will not quantify its domestic market share.

Mr Hiemstra said: "We are dedicated brewers. DB - now DB Breweries and the Liquorland retail franchise - is a New Zealand company managed by New Zealand for the New Zealand market.

"We are very happy with it, and happy with our 75 per cent shareholding."

Since flicking Corbans to Montana, APB has recalled DB Breweries chief executive Jac van Herpen to Malaysia, leaving Brian Blake, group managing director of the DB Group, to assume direct management control of brewing.

Mr Blake says DB Breweries would aim to sustain positive earnings from the last six-month result, where the brewer turned in pre-tax profit of $22.7 million compared with $12.4 million in the same time last year.