Vietnam 2017: Jardine-Vinamilk, Thaibev-Sabeco among blockbuster M&A deals

A woman shops for Vinamilk products. Photo from the company's website.

Vietnam has become a hotbed for investments through both direct projects and equity financing with M&A value in the country hitting a record high of $10.16 billion in 2017, with more than 20 mega deals at over $100 million. The market now looks even more rampant with increasing valuation, according to data platform Stoxplus. M&A transactions in 2017, on average, were 50 per cent more expensive than listed shares in the same industries, the intelligence company showed.

There is also an unprecedented opportunity for Vietnam to dispose its stakes in state businesses, a process the country has been marketing internationally. Vinamilk, the country’s biggest listed company with a current market capitalisation of $12 billion, has succeeded in doing so by selling a 3.33 per cent state holding to a Jardine Matheson unit.

With a series of pending sell-downs from other biggies like Sabeco and PetroVietnam’s subsidiaries, as well as the privatization of the telecom sector, the Vietnam M&A outlook is even more exciting.

Investors who target emerging markets should keep an eye on Vietnam, experts have opined, including fund manager veteran Mark Mobius. “This up-and-coming market hasn’t fully embraced capitalism – it remains a Communist state – but it has managed to achieve an interesting balance,” the Franklin Templeton chairman wrote on a note.

Looking back the year of 2017, DEALSTREETASIA picks the following four most significant M&A transactions, all involving overseas investors.

JC&C acquires Vinamilk in a series of purchases

Vietnam’s dairy major Vinamilk attracted an investment of over $1.15 billion by Jardine Cycle & Carriage (JC&C) in a span of one week in  November 2017.

The Singapore-based company initially acquired a 3.33 per cent interest for $616.6 million, from the state auction, a similar transaction to December 2016 that saw Thai Beverage’s Fraser&Neave buy 5.4 per cent in a $500 million deal.

But JC&C continued to push its holding in Vinamilk to a 10 per cent stake, being the second largest foreign shareholder after Fraser&Neave (18.7 per cent).

The auction ended without the government trumpeting a timeline for the next divestment, but the competition for Vinamilk shares is seen as more dramatic. Fraser&Neave has spent 12 years building up a major ownership with intention to control the business, while the aggressive JC&C is predicted to continue to rev up its investment.

Vinamilk is an attractive company not only because of its price, earnings growth, quality of management and corporate governance, but also thanks to the market potential. Per-capita milk consumption in Vietnam was only 16 litres per annum compared to more than 100 litres in the US and 30 litres in China, but has been growing very quickly, according to Mark Mobius in his note.

Also read: Asian investors compete to build up stakes in Vinamilk

Thaibev acquires Sabeco in $4.9 billion deal

Vietnam’s largest brewer, the Saigon Beer Alcohol and Beverage Corporation (Sabeco), in December 2017 sold a stake of nearly 54 per cent to Thai Beverage Pcl (ThaiBev), receiving an estimated $4.89 billion.

ThaiBev, controlled by tycoon Charoen Sirivadhanabhakdi, through its local unit Vietnam Beverage purchased 343.642 million Sabeco shares at the starting price of $14.05. The only other bidder, a Vietnamese individual, bought 20,000 shares, or 0.003 per cent, at a price of ($14.07) each.


Men drink Sabeco’s Saigon beer on a roadside restaurant in Hanoi, Vietnam November 29, 217. REUTERS/Kham

The Sabeco deal is said to allow ThaiBev to boost the chain of its investments in Vietnam. Tits Fraser and Neave Ltd. investment unit, it also holds a 16 per cent stake in Vinamilk, the country’s largest dairy firm and 49 per cent stake in a Vietnamese food and beverage company, the Vietnam F&B Alliance Investment Joint Stock Co.

Sabeco is Vietnam’s largest beer producer holding about 40 per cent of the nation’s $6.5-billion beer market. Revenue from beer sales contributed 85 per cent to Sabeco’s total revenue and 95-97 per cent to its profit in 2014-2016.

After the sale, state ownership in Sabeco is now down to 36 per cent. The brewer’s 2017 after-tax profit is forecast to be $215.6 million, an increase of 9.4 per cent year-on-year.

ANZ exits retail business to Shinhan Bank

In April 2017, ANZ announced to sell its Vietnam retail banking operations to South Korea’s Shinhan Bank. The sale included all eight branches located in Hanoi and Ho Chi Minh City. The value of the disposal was not disclosed, but ANZ said the retail division held A$320 million in lending assets and A$800 million in deposits.

The move followed the Australian lender’s earlier retail business exits in five other Asian nations to DBS in 2016 as it sought to focus on its core corporate financial services and investment banking.

ANZA man walks past a branch of the Australia and New Zealand Banking Group Ltd (ANZ) in Sydney October 29, 2013. REUTERS/David Gray/File Photo

Prior to the announcement, sources said, five institutions were interested in the sale. A source close to the matter told DEALSTREETASIA that a Vietnamese lender, VIB, was among those suitors.

Shinhan Bank is examining a different approach in Vietnam compared to other banks, through the acquisition. Also in 2017, Commonwealth Bank of Australia sold its Ho Chi Minh City branch to VIB, HSBC is seeking to exit Techcombank, and Standard Chartered is looking to end its partnership with Asia Commercial Bank.

CJ acquires Gemadept units after long pursuit

South Korea’s conglomerate CJ Group, which is said to have disbursed its $500 million commitments to Vietnam earlier in 2017, completed the acquisitions of two businesses under Vietnam’s biggest logistics firm Gemadept.

The group purchased a 50.9 per cent stake each in Gemadept Logistics Holding and Gemadept Shipping Holding, totalling $85 million.

CJ was not alone in pursuing the deal, as Taekwang Industrial had earlier sealed a preliminary agreement to acquire a meaningful stake at Gemadept from its private equity investor – Vietnam Investment Group.

However, the deal failed to go through due to price mismatch.

With this latest acquisition, CJ has added logistics as a new industry in its M&A map, after buying into companies in the food processing, animal feed and entertainment sectors.

FPT sold subsidiaries to strategic investors

Vietnam’s tech major FPT Corporation has finally sold part of its distribution subsidiary, FPT Trading, following past statements to offload its retail units to facilitate core business growth.

It sold 49 per cent stake to Taiwan’s Synnex Technology International Corporation for some $38 million.

Along with the sale of the IT and telecom equipment importer, FPT also offloaded 35 per cent of FPT Digital Retail to institutional investors including VinaCapital and Dragon Capital who collectively have 30 per cent. Financial details were not disclosed but VinaCapital said it invested $11 million in the round.

The plan to divest from FPT Trading and FPT Digital Retail was kicked off in 2015, and FPT then said proceeds from the sale would be used for business consolidation in telecommunications. Its FPT Telecom unit is currently more than 50 per cent owned by the State Capital Investment Corporation. FPT said, it will raise its holding in this company to a controlling interest once the government divests.

Also read:

Vinamilk sells 3.3% to a foreign investor for $396.5m

Singapore’s Jardine Cycle & Carriage acquires 5.53% in Vinamilk for $616.6m