Vietnam Beverage expects to purchase 51% of Sabeco shares

The Vietnamese government has effectively declared Thai Beverage eligible to buy a controlling stake in Saigon Beer Alcohol Beverage Co., the country's largest brewer. In an effort to divest state fund from major state owned enterprises (SOEs), the government has decided to sell 53.59% of outstanding shares in the brewer, better known as Sabeco to raise nearly 5 billion USD. Vietnam's Ministry of Industry and Trade announced that Thailand's top beverage producer is entitled to seek a 51% interest, albeit indirectly.

According to regulation of competitive offering of Sabeco shares, investors who have an interest of acquiring 25% or more of Sabeco shares have to announce its intention publicly 7 days in advance. This is also a requirement for such investor to pay a deposit. In case the investor despite having completed deposit but wants to withdraw from the bidding, the investor can take the deposit back before the deadline of 16.00 p.m on December 17.

The government is to begin reviewing bids next Monday. Normally, as a foreign company, ThaiBev would have been allowed to buy less than 40% of Sabeco shares. But the purchase is to go through the Thai group's local affiliate -- Vietnam Beverage. As of 18.00 p.m on December 11, which is 7 days before the taking place of bidding on December 18, only Vietnam Beverage registered the intention to acquire for more than 25% shares of Sabeco.

Established in October, Vietnam Beverage is a wholly owned subsidiary of Vietnam F&B Alliance Investment, which is 49%-owned by ThaiBev via a company in Hong Kong. The affiliate informed the trade ministry on Monday of its desire to purchase 51% of Sabeco, raising the question of how the ministry would respond. 

More than 9% of Sabeco shares are already held by foreign companies, including Dutch brewer Heineken. In principle, Vietnam caps foreign ownership of state enterprises at 49%, which leaves no more than 39% available to a foreign entity in the coming share sale. But because the government is treating Vietnam Beverage as a domestic company, ThaiBev is free to seek majority control. 

Bid applications will be accepted until Sunday, meaning other brewers like Kirin Holdings of Japan and top global player Anheuser-Busch InBev of Belgium could still emerge as contenders.
Sabeco controls a 43% share of Vietnam's beer market, and some of its brands, such as 333, are known internationally. The domestic market is expected to amount to 4 billion liters in 2017, up from 3 billion liters in 2012.

While beer consumption is declining in Japan and other developed countries, Vietnam, with its average age of 29, is one of the world's most promising beer markets. And Sabeco controls more than 40% of this. The government’s divestment plan from Sabeco is seen as a big opportunity for foreign brewers to infiltrate Vietnam’s beer market. 

As Sabeco's valuation has shot up amid expectations of a fierce bidding war among major global players, the likely cost of an acquisition has surged. Furthermore, it is extremely difficult for foreign shareholders to assume control of the brewery since Vietnam places a cap on overseas investment.

Consequently, Japan's Kirin Holdings and Asahi Group Holdings are now largely expected to bow out of the bidding. But the two Japanese beer giants can instead put their energies into other foreign markets.

Kirin is stepping up efforts to bolster its presence in Myanmar's emerging beer market following structural reforms, such as the brewer's liquidation of its Brazilian operations. Asahi is looking to channel many of its resources into European beer operations, which the company purchased from Anheuser-Busch InBev earlier this year for about $10.6 billion.