Doing Business

‘Golden time’ for American corporations to invest in Vietnamese giants

Trường Lăng

November 11, 2023

Doing Business

‘Golden time’ for American corporations to invest in Vietnamese giants

Trường Lăng

November 11, 2023

Large foreign corporations and investment funds take advantage of pouring money into large enterprises, especially in the consumer, retail, pharmaceutical, and financial industries. The current period is regarded as the “golden time” for Vietnamese consumption.

More foreign giants pour money

The world’s top private investment fund Bain Capital has agreed to invest at least 200 million USD in equity capital into Masan Group, with a value of 85,000 VND per share, according to an announcement made by the billionaire Nguyen Dang Quang’s Masan Group Corporation (MSN). This costs substantially more than the market rate of 77,400 VND per share.

In this transaction, equity will be invested in the form of preferred dividend shares, which will convert into common shares at a 1:1 ratio. For the first five years, the dividend is set at 0%, and starting in the sixth year, it rises to 10% annually. Furthermore, foreign investors will continue to receive dividend payments at a rate equal to the dividend received on each common share (if any). After 10 years from the date of issuance, this capital will be required to convert into common shares of Masan Group.

Masan will use the funding from Bain Capital to strengthen its financial position and enhance its balance sheet. Other investors are negotiating with Masan as well. Masan has the ability to expand investor attractiveness by up to $500 million USD depending on the group’s capital requirements and the state of the market

Recent foreign capital flows into Vietnam through direct (FDI) and indirect channels (buying shares in Vietnamese firms) have shown confidence despite many ups and downs in the global economy and unpredictable USD swings.

Through indirect investment routes, the retail, banking, and pharmaceutical sectors have attracted significant interest from international investors.

The national investment fund of Singapore, GIC, and other Thai investors are reportedly interested in buying 20% of Bach Hoa Xanh’s shares on September 29. Bach Hoa Xanh is the third-largest retail chain in Vietnam and is estimated to be worth between 1.5 and 1.7 billion USD. The deal is almost done, and it’s expected to finalize soon, maybe in the first quarter of 2024.

Many Vietnamese enterprises, especially in the consumer and retail sectors, receive interest from foreign investors in purchasing shares. Source: Internet

Several large Korean companies are investing heavily in the potential retail pharmaceutical market. According to Business Korea, Trung Son Pharma, a company that owns the biggest drugstore chain in Western Vietnam, has just signed a deal to purchase 51% of the company’s shares for more than 391 billion won (almost 30 million USD, or over 720 billion VND). The transaction is anticipated to close in October of this year.

In 2022, Trung Son Pharma expects to generate more than 1,300 billion VND in sales from its chain of 140 pharmacies. This company has an extremely rapid rate of growth. Since 2019, this business has expanded by an average of 46% yearly, which is significantly quicker than the An Khang pharmacy chain run by Mr. Nguyen Duc Tai and on par with the Long Chau chain run by FPT.

According to Bloomberg, Thomson Medical Group’s agreement to pay 381.4 million USD for the majority ownership of the FV International Hospital (France-Vietnam International Hospital) marked the largest transaction in the history of the Vietnamese healthcare industry. According to Reuters, SHB is negotiating to sell 20% of its shares to investors from Korea and Japan for a valuation of 2.2 billion USD in the banking and finance sector.

Benefit from the “golden time

Over time, businesses from Japan, Thailand, and Korea have promoted the purchase of shares in well-known Vietnamese companies, focusing on retail, consumption, banking and finance, pharmaceuticals, food, beverage, plastics, and other industries

The largest transaction saw the Thai powerhouse investing $5 billion USD to purchase Vinamilk or a sizable portion of Sabeco, the beer company with the largest market share in Vietnam

Recently, significant Vietnamese firms have seen an increase in interest from Singaporean, American, and European corporations

An American private investment company with its main office in Boston is called Bain Capital. The corporation’s initial investing venture in Vietnam was this transaction

Investors have previously observed American fund Warburg regularly investing in Vietnamese firms. A well-known fund that focuses on closing acquisitions for several hundred million dollars at a time is Warburg Pincus. It has made enormous investments in numerous well-known Vietnamese companies, including VinaCapital, Vincom Retail, and Novaland (NVL), totaling billions of US dollars.

It is evident that the majority of share purchases are concentrated on well-known businesses in the sector in order to tap into Vietnam’s 100 million-person consumer and retail market. Others are export-oriented businesses that benefit from exporting to markets in Europe, the US, and Japan, such as the seafood sector.

Like investments in Sabeco, The Gioi Di Dong, or a number of pharmaceutical firms, Bain Capital’s deal with Masan indicates investors’ confidence in the expansion of the Vietnamese consumer market as well as the potential of Masan’s retail consumer sector. The “golden time” of spending in Vietnam, according to Danny Le, general director of Masan Group, will allow Masan to increase profits by a factor of several. The deal with Bain Capital is a recognition of Mason’s prior accomplishments.

According to Bain Capital executive Barnaby Lyons, working with Masan is a strategic investment undertaking in Vietnam. Vietnam’s consumer market is attractive and expanding quickly.

With an anticipated annual growth rate of 7.7% from 2022 to 2040, Vietnam is expected to be Southeast Asia’s consumer market with the quickest rate of expansion.

An impressive growth rate has been achieved as a result of the faster urbanization process. The consumer class is growing as a result of rising wages and a greater variety of requirements, including those for lifestyle and financial experiences in addition to bare necessities.

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