Vietnam & Thailand: ThaiBev wins auction to buy majority stake in Sabeco

Thai Beverage has won an auction to buy a majority stake worth $4.84 billion in Vietnam’s top brewer Sabeco, a lofty deal that adds a major asset to the beer-to-property empire of Thai magnate Charoen Sirivadhanabhakdi, Reuters reported on December 18.

The deal is a big step for Charoen, the son of a Bangkok street vendor, who is emerging as one of Asia’s biggest power players in brewing. He dominates his home market with Chang beer and owns Singapore’s Fraser and Neave Ltd. The Sabeco stake will give him control of brands like Saigon Beer and 333.

The Sabeco deal will also help Thai Beverage (ThaiBev) tap into Vietnam’s beer market, worth about $6.48 billion last year, where a young population and booming economy are an attractive lure, despite political resistance, a high minimum bid price and a cap on foreign ownership.

ThaiBev’s local unit, Vietnam Beverage Co Ltd, was named winner of the 54 percent Sabeco stake on offer at the auction on December 18 after global brewing groups stayed away. It barely had any competition as the other investor, a Vietnamese individual, bid for only 0.003 percent.

Late on December 17, Singapore-listed ThaiBev had said that the Vietnamese unit had submitted the registration form to participate in the bidding.

Vietnam Beverage is owned by Vietnam F&B Alliance Investment Company, which is 49-percent owned by BeerCo Limited - an indirect but wholly-owned unit of ThaiBev, official documents about the companies showed.

“We are very grateful for the opportunity to participate in the future of Sabeco,” a legal representative for Vietnam Beverage told reporters after the auction.

The government had set a minimum sale price of 320,000 dong or $14.1 per share for Sabeco, formally known as Saigon Beer Alcohol Beverage Corp, whose shares have jumped almost three fold to 309,200 dong since its listing a year ago.

That priced the target at about 36 times core earnings, more than double the trading multiples for global peers, indicating Charoen had to pay a hefty premium to secure the prize.

“We see this as an example of a successful equitization process,” said Fiachra Mac Cana, head of research at Ho Chi Minh City Securities. “The sums involved are huge and this is also good news for government coffers at the end of the year.”

ThaiBev, controlled by Charoen, was keen to buy Sabeco in a bid to expand outside its home market, sources told Reuters.

Sabeco’s foreign ownership is capped at 49 percent. With 10 percent already in foreign hands, only 39 percent was on the table for overseas buyers at the auction on December 18. Local bidders could bid for a majority stake of up to 54 percent. Heineken holds a 5 percent stake.

Reuters previously reported the auction was drawing interest from brewing groups such as Anheuser-Busch InBev, Kirin Holdings, Asahi Group Holdings and San Miguel, but in the end they all stayed away.

“There’s a disconnect between what the government wants to achieve and how international brewers view this auction,” said one person familiar with the matter.

“In a normal auction, bidders are fully aware of what stake they’ll end up owning and bid for it accordingly,” said the person, who was not authorized to speak to the media.

Unlike similar sales in developed markets, where investors are whittled down over several rounds and offers can be adjusted, Sabeco bidders needed to submit a single offer for a specific number of shares in a sealed envelope in one round.

Truong Thanh Hoai, an official at Vietnam’s trade ministry, said there was a level playing field for bidders in the auction, but added the price on offer was not attractive for everyone.

“Some investors see Sabeco fitting with their business philosophy and they can exploit its potential, while some others don’t see it as a fit and feel they can’t make a profit from the amount of capital they’re paying, so they don’t participate.”

Charoen, who has shown an adept hand at cultivating ties with governments, started trading and supplying distilleries in the 1960s and was able obtain concessions to produce liquor at a time when production was under strict state control.

The Thai King bestowed a royal name on the family in 1988, recognizing service to the country.

In Vietnam, Charoen already owns nearly 20 percent of the country’s biggest-listed firm Vinamilk through Fraser & Neave. He has also acquired the Metro supermarket chain as well as other consumer goods and convenient stores in the country.

The current deal, however, looks expensive, a Singapore-based financial source said, but could bear fruit if ThaiBev had come to certain agreements with its Vietnamese partners.

“These multiples only make sense if there is a concession available,” said the source, adding there would likely be job cuts and re-allocation of employees from Sabeco to other state firms, helping ThaiBev improve efficiencies.

Still, getting the firm in line with rivals’ valuations would be tough, said the person, who did not want to be named due to rules on talking to media.

“He would have to double EBITDA to get the multiple below 20 times. That’s where the highest global peers are trading.”

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