ThaiBev bets big on Vietnam with $6.5b brewery stake

A worker checking beer bottles in a Saigon Beer Alcohol Beverage Corp factory. ThaiBev's deal gives it access to a strong player in Vietnam's thriving beer market, and will allow it to diversify its revenue streams.
A worker checking beer bottles in a Saigon Beer Alcohol Beverage Corp factory. ThaiBev's deal gives it access to a strong player in Vietnam's thriving beer market, and will allow it to diversify its revenue streams.PHOTO: REUTERS

HO CHI MINH CITY • Thai Beverage (ThaiBev) is doubling down on Vietnam after it partnered a local company to buy a US$4.8 billion (S$6.5 billion) stake in the country's largest brewer, a key step for the company controlled by billionaire Charoen Sirivadhanabhakdi as it seeks to dominate South-east Asia's beverage market.

Vietnam Beverage, the local unit which ThaiBev holds a stake in, said it won the bidding for an almost 54 per cent holding in Saigon Beer Alcohol Beverage Corp (Sabeco).

ThaiBev emerged as the only major foreign investor to bid in what had been billed as a hotly contested auction of Vietnam's biggest asset sale on record. 

Vietnam's Ministry of Industry and Trade sold the Sabeco stake for 320,000 dong a share, according to a statement to the stock exchange. That is a 3.5 per cent premium over yesterday's closing price.

While global companies including Anheuser-Busch InBev and Asahi Group Holdings had shown interest earlier, many were put off by Sabeco's valuation as the stock surged 56 per cent this year.

ThaiBev is paying a premium to get into Vietnam's US$6.5 billion beer market as it targets to expand across South-east Asia to diversify revenue streams.

"While the deal could be deemed pricey, it does give ThaiBev access to a strong player" in Vietnam's growing beer market, CIMB-GK Securities analysts Cezzane See and Siew Khee Lim wrote in a note before the winning bid was announced.

"The acquisition is in line with the group's Vision 2020 of being a regional beverage play."

To solidify its position in Southeast Asia, ThaiBev is seeking to increase the revenue contribution from outside Thailand to more than 50 per cent by the end of 2020. The company gets 97 per cent of its sales from its domestic operations, according to Bloomberg data.

ThaiBev, through its Fraser and Neave investment unit, also holds a 16 per cent stake in Vietnam Dairy Products Joint Stock Company, the country's biggest dairy, and has registered to increase its holding.

Another Charoen-owned company, TCC Holding Co, struck a deal to acquire Metro Cash & Carry Vietnam for about US$700 million in 2015.

The Sabeco deal allows ThaiBev to boost the chain of its investments in Vietnam, said Mr Pham Phu Ngoc Trai, chairman of Global Integration Business Consultants. "Thai Beverage has more advantages than other competitors in this sense," he said.

ThaiBev said it has confidence in the "growth potential of the Vietnam market and has genuine interest in exploring investment opportunities in the country", according to a statement last week.

An expanding middle class and youthful population helped drive a 300 per cent surge in beer demand since 2002, according to Euromonitor International.

Vietnam raised a total of 110 trillion dong from the sale, with the only other bidder an individual who purchased a less than 1 per cent stake in the brewer. Vietnam Premier Nguyen Xuan Phuc will decide whether to sell more shares of Sabeco, the head of industry at the Trade Ministry, said.

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A version of this article appeared in the print edition of The Straits Times on December 19, 2017, with the headline 'ThaiBev bets big on Vietnam with $6.5b brewery stake'. Print Edition | Subscribe