Masan Already Acquires Tuong An?

Both MSN and TAC have denied the rumour. However, in Vietnam, many rumours have turned to be official later.

 

Previously, the information that Vietnam Export - Import Commercial Joint Stock Bank (Eximbank, stock symbol: EIB) acquired the shares of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank, STB) was believed to be a rumour but it was then a truth. A similar case happened to the information that Saigon - Hanoi Commercial Joint Stock Bank (SHB) was taking over Hanoi Building Commercial Joint Stock Bank (Habubank, HBB).

 

Thus, many expect TAC will belong to MSN as the latter used to acquire Vinacafé Bien Hoa Joint Stock Company (VCF).

 

Cooking oil is gaining a larger structure in consumer food industry, with 29 percent in 2010, according to Nielsen Vietnam, a market research firm. Cooking oil industry expands about 15 percent annually. TAC’s net profit rose more than 135 percent and 215 percent in 2009 and 2010, respectively. Although this indicator slid 71 percent in 2011 because of higher raw material prices, such a growth is enough for the appeal of TAC.

Buying into TAC’s stake is also consistent with MSN’s long-term strategy. In the Annual Report 2011, Mr Madhur Maini, Managing Director of MSN, said: The company’s objectives are: “Expanding the scope of consumer goods sector by means of internal growth and M&As.” As for consumer goods sector, MSN is aiming at the markets currently dominated by State-owned enterprises or fragmented but there is a clear roadmap for industry amalgamation. This goal is realised by its subsidiary Masan Consumer’s takeover of industry-leading companies.

 

Buying into TAC’s stake is also consistent with MSN’s long-term strategy. In the Annual Report 2011, Mr Madhur Maini, Managing Director of MSN, said: The company’s objectives are: “Expanding the scope of consumer goods sector by means of internal growth and M&As.” As for consumer goods sector, MSN is aiming at the markets currently dominated by State-owned enterprises or fragmented but there is a clear roadmap for industry amalgamation. This goal is realised by its subsidiary Masan Consumer’s horizontal takeover of industry-leading companies.

 

Moreover, TAC is the only cooking oil producer listed on the stock market. It is much easier to acquire more than 50 percent of stake of a listed company than that with an unlisted one like Calofic.

 

For its part, MSN can also bring benefits to TAC. Tuong An is now the second largest cooking oil producer in the country with 25 percent of market share, just after Calofic with 45 percent. Currently, National Company for Vegetable Oils, Aromas and Cosmetics of Vietnam (Vocarimex) holds a 51 percent of stake in TAC. Hence, TAC’s input and output prices are determined by Vocarimex. TAC has to purchase raw materials from its parent company at a price usually 5 percent higher than the market price, according to research by Kim Eng Securities (KEVS). If MSN takes over TAC, it can find input suppliers offering more competitive prices. Taking initiative of inputs is also a factor to help Cai Lan to maintain its market leadership. Vocarimex holds only 32 percent of stake in Calofic and it is unable to control input issues as Wilmar Group of Singapore owns 68 percent of stake).

 

If it wants to buy controlling shares (over 50 percent) in TAC, MSN must negotiate with Vocarimex. But, Vocarimex may not want to sell a good company like TAC, said Dr Tran Vinh Du, TNK Capital Consulting Company.

 

This possibility is likely if we refer to the case of PetroVietnam General Service Joint Stock Corporation (PET). State-owned Vietnam National Oil and Gas Group (PetroVietnam) is currently holds more than 35 percent of stake in PET but it does not intend to sell the stake in this company. According to PetroVietnam, it often sells stakes in poor-performing units but PET is out of this case.

In this case, MSN may use the technique as it used to purchase VCF. It bought from major shareholders and put up for a public acquisition. By the end of the first quarter of 2012, MSN has VND15 trillion worth of cash and short-term assets.