F&N/OUE

F&N/OUE: OUE is in talks with unidentified parties to consider a counter-offer for F&N. The pty group, which is owned by Indo's Riady family (Lippo Grp), surprised the mkt last week with a bid for F&N's hospitality business that did not go through. Latest move puts further pressure on the Thais to raise their $8.88-a-share offer for F&N, which closes on Oct 29. OUE did not specify who it was talking to, but mkt watchers were quick to name Kirin as a potential partner. Attention also returned to Coca-Cola, which was earlier said to be interested in F&N's soft drinks business. OUE would find it tough to swallow F&N alone, when TCC's offer values the conglomerate at over $12.6b in all. OUE's mkt cap is around $2.75b, and it had some $499.2m in cash. It may pocket another $1.7b or so should it sell Mandarin Orchard SG and Mandarin Gallery. Units linked to Lippo may also back OUE in its bid for F&N. The Lippo group has interests across sectors from fin services to pty. SG listed Auric Pacific Group, which is in the food industry, is also related to Lippo. No matter who OUE partners to launch an offer for F&N, getting enough SGD funding would be crucial. 2 out of 3 local banks - DBS and UOB are already TCC's financial advisers and lenders. Nevertheless, OUE has put further pressure on the Thais to sweeten their deal. As such, TCC may be forced to raise its offer to secure as many shares as possible from the market. Meanwhile Deutsche raises F&N TP to $10.23 with a Buy Call, note that a counterbid for FNN could drive a narrowing of NAV discounts, failing which medium term synergies, corporate action and capital deployment should be a positive catalyst for FNN.