F&N versus MEHL...and also versus "F & N Bail Bond"? Heh. Just kidding. So far it's really about F&N versus MEHL. And I am so looking forward to reading how the case will be decided when both party meet in court. See, the jointly appointed independent valuer has determined the fair value of the disputed Myanmar Breweries, but value it in kyat, instead of in US$ or at least, it should be made clear the value of kyat referring to which year. Sigh. What a lousy valuer, one may point out. Heh.
A long-drawn battle over Myanmar Breweries (MBL) is coming to a head, with both stakeholders preparing to face off in court.From Straits Times, "F&N, Myanmar firm bound for court again over brewery stake".
Myanma Economic Holdings (MEHL) asked the Singapore High Court on Wednesday to force the sale of a 55 per cent stake in the brewer held by Fraser and Neave (F&N) to be completed by Aug 20.
MEHL has also filed an application for an interim injunction requiring F&N, its joint venture partner in the firm, to sell its stake for 500 billion kyat (S$540 million).
F&N is refusing to budge from its earlier position that any sale of the stake should be completed at the estimated fair value of US$560 million (S$770 million).
It insisted that the sum was determined by the jointly appointed independent valuer.
"It is our position that by choosing to refuse to complete the sale at US$560 million, MEHL has... breached its obligations," F&N said yesterday in a filing to the Singapore Exchange (SGX).
The exchange rate to be used for the deal has been a sore point between the joint venture partners.
While F&N says the 2013 US dollar/Myanmar kyat exchange rate must be used, MEHL has demanded that the deal be completed based on the official exchange rate as stated by Bloomberg on the day before the sale is closed.
MEHL's desired exchange rate would yield about US$401 million, well under what F&N is demanding.
The two firms have been at loggerheads since 2013, when F&N was taken over by parties linked to Thai tycoon Charoen Sirivadhanabha.
MEHL, which holds a 45 per cent stake in MBL, said the takeover breached the joint venture agreement, which, in turn, entitled it to buy its partner's stake.
It initiated legal proceedings and won but that triggered the dispute over the exchange rate.
An arbitral tribunal was appointed to settle the dispute over the estimated fair value of the F&N stake, which was nominated at 500 billion kyat by an independent valuer last month.
"MEHL stands ready and willing to conclude the sale and purchase of F&N's stake in MBL at 500 billion kyat within the 30-day period ordered by the arbitral tribunal," MEHL director Nay Wynn had said.
But F&N said MEH's refusal to complete the deal at US$560 million is a breach of its legal obligations. "The company has notified MEHL that it ... shall remain a shareholder of MBL," F&N said in its SGX filing yesterday.
Myanmar Brewery, which makes Myanmar Beer, Myanmar Double Strong and Andaman Gold, is the country's runaway leader, with an 83 per cent share of the beer market by volume.
Losing the MBL stake would deprive F&N of a significant growth driver and its only alcohol product as it sold its stake in Tiger Beer maker Asia Pacific Breweries in 2012 to Heineken.
Myanmar Brewery is the country’s leading beer-maker, producing popular domestic brew Myanmar Beer as well as Tiger Beer under contract.From Myanmar Times, "Myanmar Brewery stake worth K500 billion".
The K500 billion valuation – US$403 million using yesterday’s exchange rate of K1240 per dollar – is for the 55 percent stake of the brewery currently held by Fraser and Neave Limited, a Singapore-based company. It comes as part of a long-running dispute with the minority owner, military-linked Myanma Economic Holdings Limited (MEHL).
MEHL won a ruling from a Singapore arbitration tribunal in October 2014, claiming its right of first refusal on the shares of Myanmar Brewery had been ignored by the sale of control of Fraser and Neave to ThaiBev in 2012. It said the sale constituted a change in ownership and therefore violated joint venture terms giving each partner first right of refusal to purchase each others’ shares before they were offered to a third party.
While the 2014 arbitration ruling decided in MEHL’s favour, it also set aside a previous valuation for the brewery and ordered the sale take place at a value determined by an independent valuer.
The valuer has determined the 55pc stake in the brewery is worth K500 billion, though the two companies disagree on what this means in dollar terms, according to statements issued by both companies yesterday. Fraser and Neave has said it would rather use an exchange rate from two years ago – when the kyat was much stronger against the dollar – while MEHL declined to specify a date for an exchange rate, though said it disagreed with Fraser and Neave’s stance.
The kyat has depreciated about 39pc against the dollar since April 2013, meaning MEHL would stand to benefit if a more recent valutation was used as it would have to pay a lower price for the majority stake in the brewery. For instance, K500 billion was worth US$560 million on Fraser and Neave’s date of April 30, 2013, while yesterday it was worth $403 million.
Fraser and Neave’s position is that any sale of the Myanmar Brewery stake should take place in US dollars based on the 2013 exchange rate. “There have been indications of a difference of opinion with MEHL on the currency and applicable exchange rate to be used for completion of the sale of the Myanmar Brewery Limited stake” it said.
MEHL said in a statement it disagrees with Fraser and Neave’s position that the sale should take place in US dollars at the 2013 exchange rate. Company officials declined to discuss the situation further when contacted yesterday.
Still, director U Nay Wynn said in the statement that the conclusion of the valuation takes the company one step closer to a final closure of an “unexpectedly long drawn process to protect our rights under the joint venture agreement with Fraser and Neave”.
“MEHL stands ready and willing to conclude the sale and purchase of Fraser and Neave’s stake in Myanmar Brewery at K500 billion within the 30-day period ordered by the arbitral tribunal.”
Myanmar Brewery has also recently faced a tightening market, as Dutch brewer Heineken and Danish brewer Carlsberg have opened this year in conjunction with local partners. Officials from both foreign brewers have acknowledged, however, that Myanmar Brewery has a significant head start.
Carlsberg said it spent $75 million on its brewery, and Heineken said it spent $60 million.