Time Called on Myanmar Beer Battle as Military Conglomerate Agrees to Buyout Terms

By Sean Gleeson 7 August 2015

RANGOON — A longstanding dispute between partners in Burma’s most popular beer brand appears to be over, after a Singapore tribunal ordered a local firm to finalize a share purchase in the coming weeks.

A subsidiary of the military-owned Union of Myanmar Economic Holdings Limited (UMEHL)—a sprawling conglomerate with interests in banking, mining, transportation and manufacturing—has agreed to pay US$560 million for the 55 percent stake of Singapore-listed beverage company Fraser & Neave in Myanmar Brewery, the producers of Myanmar Beer.

The sale will be finalized by a court-ordered date of Aug. 20, following a last-ditch attempt by UMEHL to petition for a 30 percent reduction in the sale price.

UMEHL began proceedings in the Singapore International Arbitration Centre in August 2013, claiming that the purchase of a controlling stake in Fraser & Neave by companies belonging to Thai business magnate Charoen Sirivadhanabhakdi led to a change in shareholding structure that violated the joint venture agreement signed in 1995.

Charoen, listed by Forbes Magazine as one of the world’s top 100 richest people, is founding chairman of liquor company Thai Beverage, best known as the brewer of Chang. Thai Beverage was one of the companies used to acquire Fraser & Neave, install Charoen as chairman and secure the tycoon a foothold in the Burmese liquor market.

A ruling on Oct. 31 last year gave UMEHL the right to buy Fraser & Neave’s stake in Myanmar Brewery, but disagreements continued over how the sale would be priced in foreign exchange.

An independent assessment published on July 22 valued the majority share at 500 billion kyats. Fraser & Neave argued that its stake should be sold at the US exchange rate on the day the dispute was first raised in April 2013, pricing the deal at US$560 million.

UMEHL sought a court injunction to fix the transaction at the exchange rate listed the day before the eventual purchase—an estimated $400 million at current market rates. The application was dismissed on July 31.

Both companies issued separate statements on Thursday, announcing that the sale of Fraser & Neave’s stake would proceed at the price originally sought by the company.

Growth in liquor sales has prompted a number of international liquor conglomerates to stake their claim in Burma and begin competing against established local brewers.

Carlsberg began brewing at a $70 million dollar facility in Bago Division in October 2014, with its Tuborg and Yoma brands hitting shelves in July ahead of an expected September debut of the company’s eponymous flagship beer.

Heineken commenced local operations in July in a joint venture with Alliance Brewery, and is expected to begin production shortly. The Myanmar Investment Commission is expected to issue another international brewing license in the near future.

According to market research firm Ipsos, the people of Burma drank an estimated 10 liters of beer per capita in 2013, nearly double the figure from three years earlier. By contrast, per capita consumption in Thailand was 25 liters and Vietnam was 30 liters in the same year.