Masan Group, one of Vietnam’s largest private companies, today announced that its wholly-owned subsidiary Masan Beverage Company Limited will launch a tender offer to acquire all of the shares in Vinacafe Bien Hoa Corporation.
In addition, the Board of Directors at Vinacafe Bien Hoa Corporation (VCF) has passed a resolution to pay a cash dividend of VND66,000 ( $3) per share, to be funded from retained earnings of approximately VND2,000 billion ( $90.9 million) as of December 31, 2017.Masan Beverage (MB) intends to tender at a price of VND202,000 ( $9) per share to increase its current ownership from 68.5 to 100 per cent.
Increasing Masan’s stake in VCF is instrumental for the former to achieve future strategic and financial results.
Already a market leader in instant coffee with power brands such as Vinacafe and Wake-up, VCF has been achieving success in growing Wake-up 247, a coffee-flavored energy drink and Vietnam’s fourth largest energy drink brand holding approximately 5 per cent market share.
In the first nine months of 2017, Wake-up 247 has grown by 58.3 per cent year-on-year, validating Masan’s diversified beverage business model of product innovation and effective nationwide distribution network.
The management believes coffee and coffee-based products are among the key pillars of growth in its beverage business that will move the Vietnamese coffee industry up the value chain.
By acquiring an additional 30 per cent stake in VCF, Masan’s earnings are expected to improve as minority interest will be reduced.
In addition to improving net margin, the transaction is also expected to simplify Masan Group’s ownership structure and further consolidate cash flows, allowing Masan to build a healthier balance sheet and meet its target debt to EBITDA ratio of below two in the next three years.
VCF is also a case study demonstrating Masan’s ability to create value for shareholders.
Under Masan’s stewardship, VCF’s revenue has grown from VND2.115 trillion ( $96 million) in 2012 to VND3.308 trillion ( $150 million) in 2016 at a compound annual growth rate of 11.8 per cent, and gross margin has improved from 27.6 to 36.2 per cent during the same period.
With the proposed tender price and cash dividend, VCF shareholders would be making approximately 3.4 times the price per share Masan paid for its initial controlling stake in 2011.
With VCF’s potential growth, the management believes the transaction would value VCF at a forward price to earnings in the mid-teens for 2018 and single digits by 2019.
The transaction is expected to close in the beginning of the first quarter of 2018, subject to corporate and regulatory approval.
By Anh Duc
(c) 2017 Vietnam Investment Review Provided by SyndiGate Media Inc. (Syndigate.info).