Aggressive M&A puts focus on Thai tycoon’s empire

August 27, 2014

By Una Galani

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Charoen Sirivadhanabhakdi’s appetite for deals has put his sprawling empire in focus. The Thai drinks-to-property tycoon is eyeing more acquisitions on top of the $3.3 billion his companies have spent this year. Investors have already given a poor reception to his most recent deals. A pick’n’mix approach to public markets may explain some of their doubts.

Graphic: Charoen’s empire

Shareholders in Singapore’s United Engineers announced on Aug. 27 that they were in exclusive talks with a company controlled by Charoen to sell a stake in the $1.4 billion group. Shares in two Charoen-backed companies, Singaporean property developer Frasers Centrepoint and Bangkok-listed consumer distributor Berli Jucker have fallen more than 10 percent in the past three months since announcing large acquisitions that stretch their balance sheets. The dealmaking adds to concerns over Charoen’s borrowings since he won the $11.2 billion battle for Singaporean conglomerate Fraser & Neave last year.

The tycoon’s empire includes at least 13 publicly-listed companies with a combined market value of more than $30 billion. The biggest by far is Thai Beverage, the maker of Chang Beer. Charoen doesn’t exert control through a single holding company, but scatters his interests across various entities held by himself, his wife, or his children.

Even that paints only half a picture. Though the bulk of Charoen’s assets are listed, Standard & Poor’s estimated that most of the group’s debt is owed by private entities. The credit agency downgraded Thai Beverage to junk status in December, citing concerns about the debt profile of its related unlisted entities. It then withdrew the rating at the company’s request. Charoen has since split Fraser & Neave, spinning off the property assets into the newly-created Frasers Centrepoint.

There is more work to do. Charoen’s dealmaking has lumped Thai Beverage with a 28.5 percent stake in a listed property group. The worry is that unwinding the awkward structure could result in Charoen’s holding company benefiting at the expense of the group’s publicly listed cash cow.

The Thai tycoon may be undeterred by such concerns in his hunt for acquisitions. But investors are showing signs of deal fatigue.

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