Warburg Pincus consortium to invest $200 million in Vincom Retail

A consortium led by an affiliate of private equity firm Warburg Pincus has agreed to invest $200 million in a strategic partnership with Vingroup, Vietnam’s biggest private sector real estate operator.

Warburg Pincus will buy a 20% equity interest in Vincom Retail, and will have representatives on the board of directors of both Vincom Retail and Vingroup. The agreement also includes a commitment from Warburg Pincus to participate in future capital-raising by Vingroup of up to $25 million, and an opportunity for the consortium to invest an additional $100 million in Vincom Retail.

If approved by regulators, it will be the biggest initial investment in a Vietnamese company by a global private equity firm and the first Southeast Asia deal by Warburg Pincus since 2010.

Vincom Retail is Vietnam’s biggest owner and operator of shopping malls, with seven assets valued at approximately $1.1 billion. Vingroup is a leading real estate developer and is among the largest companies listed on Vietnam’s stock market in terms of market capitalisation. In 2012, it raised $300 million from a convertible bond issuance and plans a share offering in Singapore this year.

This transaction marks the first Vietnam investment by Warburg Pincus, which has been active in Asia since 1994. Its previous investments in the region include China Auto Rental, Kidswant and Intime Department Store.

The consortium for the Vincom stake includes Credit Suisse and Dragon Capital.

“This strategic partnership is founded on a common vision for developing Vincom Retail’s operations so as to benefit from one of the world’s fastest growing domestic retail sectors, the favourable long-term economic outlook in Vietnam and the rapid development of an urbanised middle class," according to a statement released by Vingroup yesterday.

The first stage of the transaction is expected to close by the end of the second quarter. Regulatory approvals are needed for the restructuring of the retail assets and open a capital contribution account with a licensed credit institution in Vietnam. The consortium also needs a certificate of investment from the Hanoi People’s Committee.

“This move fully supports Vingroup’s plans to bolster recurring revenue streams by increasing the base of retail property assets occupied by our high quality tenants with long-term leases,” says Le Thi Thu Thuy, Vingroup’s vice-chairwoman, in a statement.

Vincom Retail’s existing assets include Vincom Centre B in Ho Chi Minh City and Vincom Centre Ba Trieu in Hanoi. It has several projects under development, such as Vincom Mega Mall Royal City and Vincom Mega Mall Times City, which are both due to open later this year.

“We are excited to partner with Vietnam’s premier property development group to further capitalise on Vingroup’s leading retail property platform and Vietnam’s favourable long-term economic outlook,” says Joseph Gagnon, managing director at Warburg Pincus.

In January, rival private equity firm KKR invested $359 million in a unit of Vietnam’s Masan Group.

Citi acted as the sole financial adviser to Vingroup, and Credit Suisse was sole financial adviser to Warburg Pincus.