Jardine Cycle & Carriage picks up S$840m stake in state-linked Vietnamese dairy producer

Vinamilk's products displayed for sale at a shop in Hanoi on Aug 4, 2017. Jardine Cycle & Carriage has secured a 5.53 per cent stake in the leading Vietnamese dairy producer.
Vinamilk's products displayed for sale at a shop in Hanoi on Aug 4, 2017. Jardine Cycle & Carriage has secured a 5.53 per cent stake in the leading Vietnamese dairy producer.PHOTO: REUTERS

SINGAPORE - Mainboard-listed Jardine Cycle & Carriage (Jardine C&C) is taking a 5.53 per cent stake in a leading Vietnamese dairy producer, it said on Monday (Nov 13).

It secured the holding following an auction on Nov 10 by the State Capital Investment Commission of Vietnam (SCIC).

Jardine C&C will pay US$616.6 million (S$839.8 million) for the stake in Vietnam Dairy Products Joint Stock Company (Vinamilk) - a move that comes about 16 months after a decision to scrap a foreign ownership limit on shares in what is Vietnam's largest listed company by market capitalisation.

The acquisition is part of a strategy of investing in market-leading South-east Asian firms, Jardine C&C said on Monday.

Vinamilk posted a net profit of about 2.694 trillion dong (S$161.6 million) for the three months to Sept 30 and, as at the date of the auction, had a market capitalisation of roughly US$10.9 billion.

The dairy producer holds a market share of 58 per cent in Vietnam, with 13 factories, 10 farms and more than 240,000 retailers as exclusive distributors. It is also active in more than 40 other countries and territories, such as New Zealand.

A Jardine C&C spokesperson said: "While the Jardine Cycle & Carriage Group is widely known for its automotive interests, we have always held shareholdings in companies engaged in multi-industry businesses."

She pointed to its interest in Indonesian conglomerate Astra, which, besides the automotive industry, also has its fingers in pies such as financial services and mining.

Jardine C&C has also been upping its stakes in businesses such as Vietnam's Refrigeration Electrical Engineering Corporation and Thailand's Siam City Cement Public Company.

"This acquisition is in line with the group's strategy to augment our significant interests in South-east Asia," the spokesperson said.

The number-crunching Jardine C&C ran for illustrative purposes showed that if its Vinamilk stake had been acquired on Jan 1, 2016, earnings per share for the full year would have ticked up from US$1.78 to US$1.80.

Jardine C&C's new investment in Vinamilk comprises both acquisitions made through the market and the 3.33 per cent stake it bought from SCIC's auction.

Mr Nguyen Chi Thanh, standing deputy general director of SCIC, said "the competitive offering of Vinamilk's shares was successful and far surpassed the market expectations" .

SCIC, which is still Vinamilk's largest shareholder, has been working to sell its stake as part of the Vietnamese government's planned divestment from the dairy firm and other state-owned enterprises.

But Singapore-based Fraser and Neave (F&N), owned by Thai Beverage, is also a major shareholder - and the company's biggest foreign investor, to boot. It now has an 18.74 per cent stake and two representatives on Vinamilk's board.

Phillip Capital upgraded F&N's stock to a "buy" call on Monday, with the target price upped from $2.53 to $2.83, on the back of Vinamilk's strong contribution to earnings.

Jardine C&C shares closed up 39 cents, or 1 per cent, to $39.60, after the announcement.