World Views | Saigon Beer – an unacquired taste, unless you’re Thai

In Asian deals, fundamentals can often matter less than connections. The latest illustration: Thai tycoon Charoen Sirivadhanabhakdi’s emergence as the sole bidder for a stake in Saigon Beer Alcohol Beverage Corp.

Sabeco ranks as the world’s most richly valued major brewer after surging 58 percent on the Ho Chi Minh Stock Exchange this year, including a 6.8 percent jump on Tuesday. So it shouldn’t be much of a surprise that a unit of Charoen’s Thai Beverage Pcl was the only one of about half a dozen foreign companies to register an interest in buying 25 percent of Vietnam’s largest beermaker – even if the country offers the growth potential that international brewers crave. Other companies may still bid for smaller stakes.

Beer giants Anheuser-Busch InBev NV and Heineken NV, and Japan’s Asahi Group Holdings Ltd. and Kirin Holdings Co. are grappling with flat or falling sales in their home markets. Vietnam, as my Gadfly colleague David Fickling has noted, is Asia’s third-largest beer producer after China and Japan with a working-age population that will overtake the latter’s by 2030 – and Sabeco has almost half the market. The Southeast Asian country could be home to the world’s second-largest increase in beer sales by volume between 2016 and 2021 after India, according to Bloomberg Intelligence analyst Thomas Jastrzab.

But the price would have been hard to explain to shareholders of these multinationals, especially given the low level of control that was on offer. A 25 percent stake would be worth USD2.3 billion based on the initial price guidance. While the government is selling 53.6 percent of Sabeco, Vietnam has a 49 percent cap on foreign investor stakes in public companies. With 10.4 percent of Sabeco already in overseas hands, any acquirer faced being stuck with a minority interest.

That’s clearly not a concern for a Southeast Asian tycoon like Charoen, who’s been cultivating connections in Vietnam and appears content to play a long game.

Charoen came to global prominence four years ago when he beat Heineken and Indonesia’s Riady family to a multibillion-dollar takeover of Singapore’s Fraser & Neave Ltd. He’s since been building up stakes in regional assets through ThaiBev and several privately held companies. These include the acquisition of Thai supermarket chain Big C Supercenter Pcl from French grocer Casino Guichard-Perrachon SA last year and a deal to buy half of Myanmar’s largest spirits maker from U.S. private equity firm TPG Capital.

Fraser & Neave is already a major shareholder in Vietnam Dairy Products JSC, or Vinamilk, Southeast Asia’s biggest milk producer. Charoen also acquired German retailer Metro AG’s wholesale stores in the country three years ago. Sabeco would further extend his interests in one of Asia’s most dynamic and fast-growing economies.

That looks like a smart strategy – provided the price doesn’t leave him with a nasty hangover. Nisha Gopalan, Bloomberg