Thai Group looks to wrap up Vietnam plastics takeover

At the conference, held as part of the 2016 Plastics and Rubber exhibition at the Saigon Exhibition and Convention Centre on March 1-3, speakers said SCG has budgeted up to US$6 billion for mergers and acquisitions to close the deals.

“Given the proximity of Vietnam to Thailand, along with the formation of the ASEAN Economic Community (AEC) earlier this year, it just makes good sense for SCG to expand in Vietnams plastics market,” said the speakers.

The plastics industry in Vietnam is doing well right now and has been growing at a very rapid rate averaging 20-25% per annum over recent years, which growth has been largely driven by foreign invested companies.

There are roughly 2,000 Vietnamese plastics companies in the industry, 90% of which are small to medium size, but none, not even the larger companies, are capable of competing head-to-head with foreign rivals.

They simply don’t have the money, technology, quality or business know-how at this juncture in time to compete with the savvier more advanced larger transnational companies.

The speakers also said the Trans Pacific Partnership (TPP) that was signed in New Zealand last month, should it be ratified and come into effect a few years down the road, would just be icing on the cake for SCG.

The acquisition last July of an 80% controlling interest in Vietnam’s Tin Thanh Packing Joint Stock Company (Batico) by SCG for US$44.4 million has been the largest purchase to date.

Batico is one of Vietnam’s top five packaging companies, churning out some 230 million square metres of product on average each year.

Since 1995, Batico has been operating out of an 18,500 square metre manufacturing facility located in Long An Province and it currently holds a 40% market share in the southern region, they said.

It boasts a customer base that includes prominent brand names the likes of Nestle, Bayer, Henkel, Dupont, Kinh Do, CP, Trung Nguyen, Walmart Gau Do, Vifon and Vinamit.

Prior to that, SCG had acquired minority interests in two other leading Vietnamese plastic firms – Tien Phong Joint Stock Company (NTP) and Binh Minh Joint Stock Company (BMP) – of 23.84% and 20.4%, respectively.

Collectively, BMP and NTP hold right at a 50% share of the structural plastic pipe market, and the deals contain complex future buy options, which left the door wide open for future purchases, said the speakers.

So far SCG has spent only a tiny fraction, an estimated US$121 million, of the US$6-billion-dollar budget in securing its ownership interests in seven Vietnamese companies in the plastics industry.

“SCG has a proven track record, it delivers on time, delivers a quality product, takes good care of their customers and as a result great things happen for the company,” said speakers at the seminar.

“And those things are starting to come together for it that are historically significant.”

However other speakers pointed out that the race is far from over, as SCG may be one of the first movers to takeover the plastics market but there are a large number of latecomers.

Businesses from Japan and the Republic of Korea (RoK) have set their sights on the industry and hope to gobble up large chunks of it over the next couple of years— as the AEC formation and signing of the TPP have only signalled the start of the race, they said.

They pointed to Japan Oji Holding Corporation’s recent purchase of stakes of United Packaging Co Ltd, and Sagasiki Vietnam Co Ltd.’s acquisition of Goldsun Packaging & Printing JSC as evidence.

Meanwhile, they said, an RoK business recently acquired a majority stake of Vietnam’s Tan Tien Plastic Packaging.