History Repeats: 2016’s Pokémon Go & Nintendo Is A New Version Of 2012’s Fraser and Neave Limited Bidding War

The recent Pokémon Go craze had caused the market capitalisation of Japanese video game maker Nintendo to increase by US$17.6 billion in roughly a week, only to then lose US$6.7 billion in a day.

I look at the Pokémon Go and Nintendo phenomenon as a good example that investors need to stay grounded.

Fraser & Neave

In late 2012, a bidding war for Fraser and Neave Limited (SGX: F99) erupted between Thai Beverage Public Company Limited (SGX: Y92) and OUE Ltd (SGX: LJ3).

Thai Beverage started the ball rolling in July 2012 when it agreed to buy a block of 313 million F&N shares for S$8.88 apiece. At the start of the month, F&N’s shares were priced at just S$7 each.

After that deal was done, Thai Beverage and its partner, TCC Assets, subsequently launched an offer in September 2012 to buy over all of F&N at a share price of S$8.88 each. Both Thai Beverage and TCC Assets are controlled by Thai billionaire Charoen Sirivadhanabhakdi.

OUE countered in November 2012 with an offer of its own for F&N shares. Its price? S$9.08 a share. Thai Beverage and TCC Assets then increased their offer to S$9.55 and – as we now know – eventually won the bid for F&N.

When OUE was locking horns with Thai Beverage and TCC Assets for control of F&N, F&N’s shares spiked to a price of over S$9.70 in January 2013.

For a sense of how the valuations for F&N had changed as a result of the market-hype over its buyout, consider the following: At the start of July 2012, F&N’s shares had a trailing price-to-earnings ratio of 12.8, according to data from S&P Global Market Intelligence. When its share price peaked at over S$9.70, the company had a trailing PE of nearly 17.

After Thai Beverage and TCC Assets won, F&N’s share price started drifting lower. In April 2013, F&N’s share price even hit S$8.18, representing a decline of over 15% from a price of S$9.70.

A Foolish conclusion

What happened in 2012 in Singapore’s stock market with F&N occurred again with Nintendo earlier this month. A single event ignited the market’s animal spirits, only for those spirits to be subsequently deflated.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat doesn't own shares in any companies mentioned.