By Rujun Shen and Rachel Armstrong
A military-linked Myanmar conglomerate has won an arbitration case against Singapore's Fraser and Neave Ltd (F&N) that will give it the right to buy the latter's 55 percent stake in Myanmar's biggest brewery.
Two Singapore arbitrators heard the case in the city-state from late June to early July and released a ruling on Friday that Myanma Economic Holdings Limited is entitled to buy F&N's shares in Myanmar Brewery, MEHL said in a statement. It had said F&N defaulted on a term in a joint venture agreement.
F&N said in a separate statement it was reviewing the decision and all its options, adding that the tribunal had ruled the $246 million MEHL wants to pay for the stake does not represent fair value.
The ruling is a blow to the Singapore food and beverages company, which has held the stake for 17 years and bided its time in Myanmar while the country was shunned by most Western companies.
Now foreign investment is starting to pour in, with the likes of Coca-Cola, Nestle and Unilever all setting up there to take advantage of the nascent consumer market.
"We are disappointed that this dispute has arisen at a time when Myanmar is opening its market, and is on the cusp of the introduction of international beer competitors," Huang Hong Peng, chief executive officer, beer, at F&N, said in a statement.
Myanmar Brewery - which makes Myanmar Beer, Myanmar Double Strong and Andaman Gold - has an 83 percent share of the country's beer market, according to an F&N presentation in May.
Proper channels
Analysts initially saw the case as an example of the lack of legal protection for foreign investors in Myanmar and the pitfalls of doing business with an institution closely linked to the country's military.
However MEHL argued that there had been a clear default by F&N on their joint venture agreement and that taking the matter to arbitration in Singapore showed they were dealing with the matter using proper legal channels.
"It is very important for Myanmar that foreign investors have confidence in the way we do business," Myint Aung, MEHL's deputy managing director, said in the statement.
"The conduct of this arbitration shows our commitment to the rule of law, and that we will always adhere to due process."
It has declined to comment on the term on which it said F&N had defaulted, but sources with knowledge of the case said it was related to the change of shareholding structure of F&N after a takeover.
Myanmar Brewery was set up in 1995 by MEHL with Heineken NV through the latter's Asian arm, Asia Pacific Breweries Ltd (APB), which transferred its 55 percent stake to F&N in 1997.
Last year, F&N was taken over by two companies controlled by Thai billionaire Charoen Sirivadhanabhakdi, including Thai Beverage PCL.
Shares in F&N and its parent company, Thai Beverage PCL, will resume trading on Monday, after they requested the Singapore Exchange halt trading of their shares on Friday.
