Fraser & Neave to return US$ 237 million to shareholders

Diversified group Fraser & Neave (F&N) proposed at the beginning of February to return some US$ 237 million to shareholders, sending its share price to its highest level in more than 2 1/2 years. The …

Diversified group Fraser & Neave (F&N) proposed at the beginning of February to return some US$ 237 million to shareholders, sending its share price to its highest level in more than 2 1/2 years. The property, beverage and publishing group is proposing a capital reduction and a cash distribution that will reduce its capital base by 10% and put 80 cents in the pockets of shareholders for every F&N share they own. The market greeted the news by driving up the share price 30 cents or 3.7% to US$ 8.35 – its highest close since June 1999. The shares were suspended for 1 1/2 hours after the lunch break to facilitate the announcement. Head of research at OCBC Investment Research Gregory Yap said the proposal “is positive in terms of enhancement to financial numbers“. He calculates that the move will boost F&N“s return on equity (ROE) to 7% from 6.8%. Based on the year ended 30 September 2001, the capital restructuring would have the effect of increasing F&N“s earnings per share to 82 cents from 75.7 cents and net tangible assets per share to US$ 10.70 from US$ 10.46, the company said. In its statement to the Singapore Exchange, F&N said the capital restructuring exercise was aimed at improving “earnings yield by the more efficient use of its resources“. The exercise has the same effect as a share buyback of 10% of its share capital at US$ 8 per share. It is also preferable to paying a special dividend as “it has the advantage of avoiding the utilisation of the company“s existing Section 44 tax credit which can be reserved for payment of dividends in the future“. In a speech to shareholders at F&N“s annual general meeting, executive chairman Michael Fam said the company“s goal to raise its ROE to 10% within the next two years has become more demanding in the aftermath of the 11 September 2001 attacks. “Nevertheless, judging by our performance in the first financial quarter, we expect this year“s results to be comparable to that for FY2001, and to maintain the enhanced dividends of 30 cents per share after tax.“ F&N has also been busy reinventing itself. It has taken two subsidiaries – Centrepoint Properties and Times Publishing – private after securing more than 90% of the voting rights in two recent general offers.