Masan Beverage Company Limited (MB), a wholly owned subsidiary of Masan Consumer Corporation, plans to make an offer to buy out Vinacafe Bien Hoa Corporation (VCF). MB will offer VND202,000 (US$8.9) per share for the remaining 31.5 per cent stake to increase its ownership from 68.5 per cent to 100 per cent.
The VCF board has passed a resolution to pay a cash dividend of VND66,000 per share from retained earnings of approximately VND2 trillion.
By buying out VCF, Masan’s earnings are expected to improve since the minority interest will be eliminated. The transaction is also expected to simplify Masan’s group ownership structure and further consolidate cash flows, allowing Masan to meet its target debt to EBITDA ratio of below 2x in the next three years.
Under Masan’s stewardship, VCF’s revenues grew from VND2.115 trillion in 2012 to VND3.308 trillion last year, with gross margin improving from 27.6 per cent to 36.2 per cent.
With VCF’s potential growth, the management believes the transaction would value VCF at a forward price to earnings in the mid-teens for 2018 and single digits by 2019.
The transaction is expected to close in the beginning of the first quarter of 2018, subject to corporate and regulatory approvals.
Already a market leader in instant coffee with power brands such as Vinacafe and Wake-up, VCF has been achieving success in growing Wake-up 247, a coffee-flavoured energy drink and Viet Nam’s fourth largest energy drink brand with approximately 5 per cent market share by volume.