VinaCapital, one of the two largest asset management firns in Vietnam, has officially decided to cease its investment in poultry firm Ba Huan after the latter's accusation of hostile takeover.
Production line at poultry firm Ba Huan.
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With regard to the deal, VinaCapital stressed the terms that were agreed to by both parties are aligned with market practices and are typical of the many mutually successful transactions that have completed in the past.
Moreover, the terms also included a number of conditions intended to protect investor's interests. These conditions are only applicable if the company cannot achieve the results forecast by management. In addition, the fund agreed to invest at a valuation significantly higher than the market valuation from a price-to-earnings basis.
According to VinaCapital, the contract was drafted in English and signed in February 2018. Moreover, the contract along with other important documents were translated to Vietnamese accurately.
The negotiation process lasted over six months. During that period, Ba Huan sought advice from consultants and understood clearly their obligations, the fund claimed.
In conclusion, the asset management firm also emphasized that taking over the company has never been its intention, nor is it part of the business strategy.
In early July, Ba Huan sought the prime minister's intervention in terminating its partnership with VinaCapital.
The firm said there were differences between the English and Vietnamese versions of the agreement, which were not what the two parties had agreed initially.
Among those terms, the poultry firm noted that VinaCapital included an internal rate of return (IRR) of 22% per year, three times higher than current interest rate at banks. In the event of the IRR not being met, Ba Huan will be fined or required to return the investment capital, along with a 22% interest, or must transfer to VinaCapital at least 51% stake in the company.
It also alleged that the partnership restricts it from engaging in any other business except chicken and eggs.
In February, VinaCapital`s flagship fund Vietnam Opportunity Fund (VOF) invested US$32.5 million to acquire a significant minority stake in Ba Huan, the country`s leading pasteurized eggs and poultry meat producer.
VOF said at that time it may also invest a moderate amount of additional capital during the next twelve months as the company delivers on mutually agreed milestones.
Established in 2001, Ba Huan accounts for 30% of Vietnam's pasteurized egg market share and is said to be a household brand. The company has made significant investments in its operations, importing modern production lines from Europe and adhering to international standards. In 2018, it expects revenue to surpass US$90 million.
