ThaiBev wins auction of brewer Sabeco
ThaiBev, the brewer of Chang beer, which is controlled by the billionaire Charoen Sirivadhanabhakdi, emerged as the only bidder in the much anticipated privatisation of the country’s largest brewer Sabeco. The auction was held on 18 December 2017.
Vietnam’s Ministry of Industry and Trade had put a 54 percent stake up for sale, although foreign investors were limited to a 38.6 percent stake.
ThaiBev employed a ruse in order to bid as a local and acquire all the shares on offer. Earlier it had purchased 49 percent stake in a Vietnamese food and beverage company, Vietnam F&B Alliance Investment Joint Stock Co. This company, which was incorporated in September 2017 for management consultancy and investment holding activities, owns Vietnam Beverage. It was this unit that registered for the Sabeco auction.
At first, plenty of foreign brewers seemed interested in buying into Sabeco. But in the end they all declined to join the fray, not least because the asking price of 320,000 dong (USD 14.09) a share was deemed very expensive.
ThaiBev’s Vietnamese unit paid about USD 4.8 billion or nearly 50 times Sabeco’s profit, insiders say. That’s a lot of money… and reminds one of the crazy times of Chinese brewery acquisitions.
“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 player.”
To solidify its position in Southeast Asia, ThaiBev is seeking to increase the revenue contribution from outside Thailand to more than 50 percent by the end of 2020. The company gets 97 percent of its sales from its domestic operations.
ThaiBev, through another vehicle, already holds a 16 percent stake in Vietnam Dairy Products JSC, 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 USD 700 million in 2015.
Two issues have been bugging pundits: how will Heineken react to ThaiBev now calling the shots at SABECO? Heineken owns five percent of Sabeco and also operates its own brewery in the country, accounting for 23 percent of total beer sales. It will also be remembered that ThaiBev and Heineken were embroiled in a fierce bidding war for Asia Pacific Breweries (Tiger beer) in 2012, which Heineken won.
But more importantly: how will ThaiBev recoup its outlay? While ThaiBev has said it has confidence in the growth potential of the Vietnam beer market, organic growth will need to be supported by significant cost cuts.
Insiders believe that ThaiBev must have got concession from high places to trim costs, like redundancies and re-allocations of employees from Sabeco to other state firms. For political reasons (creating jobs and tax revenues locally) Sabeco has dotted the country with medium-sized breweries over the years, bringing their number up to 24 in 2016.
However, the Ministry of Industry and Trade – aka the State – will still control more than 35 percent of SABECO after the sale which gives it major blocking rights under Vietnamese law.
It will be interesting to watch how this plays out in the medium term.
