For Asia Beer Deal, Heineken Needs to Drink Rivals 'Under the Table'

Asia Pacific Breweries operates 30 breweries across Asia, and in addition to Tiger Beer, owns regional brands like Bintang lager.

Heineken, which accounts for just under 10% of the global beer market, has a smaller emerging markets presence than peers AB Inbev and SABMiller.Bloomberg Industries analysts noted in July that were Heineken to eventually succeed in its pursuit for APB, it would leapfrog SABMiller as the world's second largest brewer.

In its July bid, Heineken quickly topped an initial bid for ABP shares from Thai Beverage in both size and price.

Both brewers are bidding APB shares owned by Singapore-based food & beverage, property and publishing conglomerate Fraser & Neave; however Heineken is seeking full control, while Thai Bev is bidding on a minority stake.

Meanwhile, F&N is reportedly looking at divesting its brewing assets and then selling out its non-alcoholic drink brands to soda giants like Coca-Cola (KO) .

As drinks giants parse over F&N's assets, including its stake in APB, Heineken's hand could be forced.

"The strategic/regional ambitions of Thai Beverage and perhaps more so Kirin, as well as the apparent historic reluctance of F&N to exit APB, suggest a deal may prove difficult to complete," wrote Berenberg Bank analyst Phillip Morrisey in a note to clients reacting to Heineken's initial July 20 offer.

Heineken's offer is "a very full price in our view and may still need to go higher," added Jefferies analyst Dirk van Vlaanderen, at the time of the initial bid.

A full blown bidding war would underscore the thirst for scarce growth assets in emerging markets among beer giants. Still, a successful bid could be positive for Heineken as it takes on ABInBev and SABMiller.

"Strategically we like the deal given the dynamic growth credentials of the Asia Pacific region and that Heineken knows the business well after 80+ years of collaboration," added Van Vlaanderen in a July 20 note.

"While this is certainly at the expensive end of recent brewing acquisitions, APB is a high-growth company and is of significant strategic importance for Heineken," wrote Davy Research analysts in late July.