Comment: Kirin's conundrum over Fraser and Neave

Now that Heineken has airlifted Fraser and Neave's share of Tiger beer out of the company's hands, all eyes turn to Kirin Holdings and ThaiBev's intentions for the Singapore food and drink group.

Kirin can hardly have planned for this turn of events after securing a 15% stake in F&N in 2010, can it? Just over two years after the Japanese brewer and food group paid US$968m for its interest in F&N, it now sits as a junior partner to ThaiBev in a business cut adrift from a successful beer joint-venture with Heineken.

So, what's next? ThaiBev is the largest F&N shareholder, with around 30%, and has given F&N's other shareholders around a month to decide on whether to let the Thailand-based group and the investment arm of its reclusive owner, Charoen Sirivadhanabhakdi, take full control.

Most likely, then, we will either witness a carve-up of F&N by Kirin and ThaiBev, or a Kirin exit, its passage eased by a pocketful of cash.

It really comes down to what both firms want. Kirin has always shown greatest interest in F&N's soft drinks and food business, with the F&N property arm hardly a core concern and the Asia-Pacific-Breweries venture always the domain of Heineken.

Within that, it is F&N's distribution network across Singapore and Malaysia that probably most excites Kirin. The firm's long-term business plan calls for it to hit sales of JPY2.5tn by the end of 2015, with 30% of that sourced from outside of Japan.

ThaiBev, for its part, is reported to be interested in F&N property, although it could also lay legitimate claim to food and soft drinks.

It seems ThaiBev is determined to squeeze out a deal for F&N. Today (28 September), although ThaiBev backed Heineken's buyout of F&N's interest in Asia Pacific Breweries, it and other unnamed parties also blocked F&N's plan to reduce its number of issued shares in order to return cash to shareholders.

If shareholders want the money, they might just have to sell up to ThaiBev. Would Kirin be willing to sell up and move out? Some reports today suggest that it would, although the Japanese firm took the rare step of stating publicly that those rumours did not come from the company itself.

Selling up could certainly dent Kirin's ambitions in what the firm regards as home territory in the Asia-Pacific region. Yet, things change. Kirin faces challenges on many fronts, including improving the profitability of dairy and brewing group Lion in Australia and its native business in Japan, building a stronger presence in China and, most recently, making good on its decision to spend a hefty sum on Brazil's second biggest brewer, Schincariol.

To make that 2015 sales target, Kirin needs to increase sales by 14% in total over the next three years, based on its 2012 sales forecast of JPY2.2tn. Falling consumption in Japan mean Kirin's sales have struggled in recent years, but F&N does not look as central as businesses in Brazil and China, and possibly Australia, to putting things right. If the price is right, Kirin could be tempted to walk from F&N.

It would, though, be loathe to relinquish access to F&N's food and drink distribution network. Over the next few weeks, Kirin's time is likely to be spent working out whether there is a financially palatable way of retaining access to that network.