Here are 3 possibilities in the F&N takeover

What if TCC fails in its takeover offer?

Here's what Nomura has to say:

Action: Offer unattractive; takeover offer to end on October 29
In its takeover offer document, TCC offered few clues on its intentions for F&N, apart from saying that it is a long-term strategic shareholder and does not intend to change its core activities. As a significant shareholder with F&B and property interests, TCC will likely explore synergistic tie-ups with F&N, whether the takeover succeeds or not, in our view.

We see three possibilities in the current takeover
1. TCC fails in its takeover offer. Under this scenario, TCC will seek board representation and the current board and management will continue its strategy. We believe that the board will likely continue with its strategy to return cash back to shareholders and revisit the capital reduction exercise since it is arguably the best way to return cash back to shareholders including TCC.

To the extent that TCC is already a significant shareholder, we believe it will likely explore synergistic tie-ups with F&N whether its takeover offer succeeds or not.

2. TCC fails in its takeover offer but manages to secure a higher stake, say closer to 40%, through open market purchases at the offer price of S$8.88. While the group will not have majority control, it could have significant influence on the board. This is probably the least preferred scenario for minorities, in our view.

3. TCC succeeds in gaining majority control. For this scenario to happen, TCC will need to increase its offer price to ensure that its offer becomes unconditional. Once in control, TCC may be more active in setting the direction for F&N including reviewing its current strategies.

If it wants control, TCC will need to raise its offer
Even if the offer lapses, we believe F&N’s share price will be underpinned by the prospect of the large cash payout and its valuation.

Kirin may be an important factor in this takeover
With a 15% stake, Kirin is well positioned to influence the outcome of this takeover.

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