Foreign firms taking control of Vietnamese M&A market

Industrial production is evaluated as an attractive investment channel so far.

A report from the Ministry of Industry and Trade (MoIT) shows significant movements in the industrial sector. The index of industrial production (IIP) increased by an annual average of 7% cent since 2012. It raised by 9.3% in the first 11 months of this year against the 7.4% in the same period last year.

Accumulated until December 2017, as many as 19 out of 21 sectors received investment from foreign partners. Of these, as much as US$186.1 billion flowed into processing and manufacturing industry, accouting for 58.4% of US$318.72 billion of the total registered foreign direct investment capital.   

Additionally, in 2017, the Vietnamese M&A market saw many deals in the industrial sector, such as those ones between SCG (Thailand) and Vietnam Construction Materials Corporation (VCM), CJ Group (the Republic of Korea) and Cau Tre Export Goods Processing JSC, Earth Chemical and A My Gia JSC, Daesang Corporation (the Republic of Korea) and Duc Viet Food JSC, and ThaiBev (Thailand) and Sabeco.

SCG fully acquires VCM

In March 2017, Siam Cement Group (SCG) acquired 100% of the shareholdings (equivalent to US$156 million) from the shareholders of VCM. Thereby, the enterprise value of this transaction was about US$440 million, including net debts and additional investment to improve the efficiency of the acquired assets.

VCM was established in 2008, producing cement bearing the brand Starcemt, Starmax, and Starpro, and exports clinkers to Bangladesh, Malaysia, and the Philippines. As of July 2016, it was employing over 300 workers.

VCM has a capacity of 3.1 million tonnes a year. According to SCG, the plant has the potential to be more efficient. After the transaction, the total cement production capacity of SCG in the ASEAN would be 33.5 million tonnes a year, with its Thai-based production capacity at 23 million tonnes.

Earlier, on February 28, SCG’s compatriot Siam City Cement finished the purchase of LafargeHolcim’s 65% stake in cement producer LafargeHolcim Vietnam, becoming the new strategic foreign shareholder in the company, while state-owned Vietnam Cement Industry Corporation (Vicem) holds the other 35%.

CJ Group dominating Vietnamese food sector

In May 2017, the shareholders of Cau Tre Export Goods Processing JSC ratified the decision to change the company’s name to CJ Cau Tre.

Earlier, the then second-biggest shareholder of the company, Saigon Trading Group (SATRA), announced the public auction of a 20% stake in the company. Two subsidiaries of CJ—CJ Foods Vietnam Ltd., and CJ CheilJedang Corporation—bought the stake and raised CJ’s total holding in Cau Tre to 71%.

CJ Cau Tre produces ready meals and frozen food, such as spring rolls, tea, raw meat, and sausages. As its products, such as BBQ sauce, started appearing more aggressively on supermarket shelves in Vietnam, CJ has also been on a roll with its M&As. In early 2016, it bought the Ong Kim kimchi brand.

Recently, another Vietnamese company also changed its name to bear the CJ mark. At the end of April, CJ finished the transaction of US$13.4 million to acquire 64.9% of food processing company Minh Dat and changing its name to Minh Dat CJ. Minh Dat has been holding the largest market share for meatballs and fishballs in Vietnam.

US$0.66-million A My Gia JSC acquired for US$80 million

In March 2017, Earth Chemical—a multi-sector company from Japan—announced spending US$80 million to acquire a 100% shareholding in A My Gia JSC, which focuses on household chemicals. A My Gia JSC was established in July 2006 with US$0.66 million of registered charter capital.

In 2014 and 2015, the revenue of A My Gia was US$14.5 million and US$15.43 million, respectively, while net profit was US$1.38 million and US$1.62 million.

Thai Beverage spends US$4.8 billion acquiring Sabeco

In an auction on December 18, 2017, Vietnam Beverage Co., Ltd., a Vietnam-incorporated unit of Thai Beverage, bought 343 million Sabeco shares, equivalent to 53.58%, at VND320,000 (US$14.09) apiece. This means that Vietnam Beverage spent VND109 trillion (US$4.8 billion) for a controlling stake.

The second buyer in the auction is a Vietnamese individual from Hanoi. He owns 0.003% of Sabeco, after spending VND6.4 billion (US$281,600) for 20,000 shares. MoIT still holds 36% of the stakes after the sale.

In a note prior to the auction, analyst Soh Lin Sin from Phillip Securities (Singapore) said that the purchase is in line with Thai Beverage’s goal to boost its presence in the ASEAN. The Thai beer giant recently forked out US$742 million to take over two leading beer brands in Myanmar.