Thai Hung Trading JSC’s offer to buy an additional 5.35 per cent stake in Vietnam-Italy Steel JSC (VIS) right after selling 20 per cent of this steel company to Kyoei Steel Ltd. is considered a wise move aiming to retain Thai Hung’s controlling right in VIS, while simultaneously receiving technology support from Japanese partners.
In early November, Thai Hung’s offer to buy a 5.35 per cent stake in VIS right after handing over 20 per cent to Kyoei Steel surprised enterprises. However, this move will bring more benefits for Thai Hung.
The first is to receive technology support as Kyoei Steel is known as the leading steel manufacturer in Japan with the chartered capital of $166.5 billion. Besides, Kyoei currently has two steel manufacturing plants in Vietnam, namely Vina Kyoei Steel JSC in Ba Ria-Vung Tau and Kyoei Steel Vietnam JSC in Ninh Binh.
Previously, at the ceremony to announce its strategic shareholders, the VIS board of directors expressed their desire to receive technology support from Kyoei Steel to upgrade the existing manufacturing capacity and improve business results.
The second is the controlling rights. Before handing over 20 per cent to Kyoei Steel, Thai Hung held a controlling stake in VIS with 65.66 per cent stake (which promptly decreased to 45.66 per cent after the sale). However, in case the offer to buy an additional 5.35 per cent is approved, Thai Hung will retain its controlling rights with a 51.01 per cent holding as well as its role as the parent company of VIS.
Remaining the parent company of VIS is important to Thai Hung because Thai Hung would retain the right to add VIS’ business results to its consolidated financial report.
Needless to say, Thai Hung has an advantage to recover its controlling right because, with the exception of Kyoei Steel, no investor can overcome Thai Hung’s existing holding of 45.66 per cent to seize a controlling shareholding.
Along with the two above benefits, Thai Hung also acquired profit from the sale of the VIS stake to the Japanese partner because in September 2016, Thai Hung completed the purchase of 12.8 million VIS shares at the price of VND13,500 ($0.59) apiece and then bought an additional 12 million shares in July 2017 at the price of VND15,000 ($0.66). Selling 20 per cent to Kyoei at the price of VND25,597 ($0.99) apiece brought significant profit.
Regarding VIS, after Thai Hung’s acquisition, VIS saw positive increases in its business results. Notably, in 2016, VIS reported a net revenue of VND3.7 trillion ($162.8 million) and a pre-tax profit of VND75 billion ($3.3 million), signifying on-year increases of 21 per cent in revenue and a 100 per cent in pre-tax profit. In 2017, the company targets making VND6.2 trillion ($272.9 million) in revenue and VND102.6 billion ($4.5 million) in pre-tax profit.
Thai Hung is well-known for its large-scale M&A deals. Besides, it is a major material supplier as well as the largest steel distributor of northern factories like VIS, Posco, Pomina, and Tisco.