Thai beer tycoon to vie for Vietnam's Sabeco

TCC, the private investment vehicle of Charoen Sirivadhanabhakdi, has expressed keen interest in the Vietnam brewery, according to the firm's chief dealmaker.

Thai Charoen Corporation (TCC) group, the private vehicle of Thai tycoon Charoen Sirivadhanabhakdi has its eye on Vietnam's largest brewer and other beverage assets in the region, Chotiphat Bijananda, the group's adviser told FinanceAsia in an interview.

Bijananda who is married to Charoen's daughter, was previously the head of investment banking for Deutsche Bank in Thailand. The 51-year old acts as TCC’s in-house investment banker, advising on acquisitions. He joined the group in 2007.

TCC, which was founded by Charoen and his wife Khunying Wanna Sirivadhanabhakdi in 1960, controls a sprawling empire including Thai Beverage which brews Chang Beer, Fraser & Neave, Frasers Centrepoint, Berli Jucker and TCC Land, which is unlisted.

Given its background in breweries, it comes as no suprise that TCC has expressed interest in Vietnam’s state owned Saigon Beer-Alcohol-Beverage Joint Stock Corporation, also known as Sabeco. The Vietnamese government owns 89% of Sabeco and last month said it is looking to sell a 53% stake to strategic investors and the public, according to Vietnamese media. “We are looking to come in as a strategic investor,” said Bijananda.

Vietnam has the highest beer consumption per capita in Asean. According to a DBS research report, per capital consumption stands at 35.5 litres per annum, more than 10 times that of Myanmar and outpacing neighbouring Thailand, where consumption stands at 29 litres per annum.

Sabeco is Vietnam's largest brewery with a 46% market share, followed by Vietnam Brewery and Habeco, which each account for 16% of the market. Given its market dominance, competition for the stake in Sabeco is keen. 

“Of course there are lot of people looking at Sabeco including major international players such as the Japanese,” said Bijananda. “However, the government has a set criteria. Companies that can buy Sabeco cannot have an established position in Vietnam's brewery market. So beer companies that already have a market presence in Vietnam may not be able to participate,” he added. At present, TCC has no beer assets in the country.

Other beer companies eyeing Sabeco reportedly include Heineken, Asahi and SABMiller. TCC has not yet hired banks to advise on a potential deal. According to a source familiar with the matter, BNP Paribas, Credit Agricole, Mizuho and Standard Chartered have been in talks about financing the bid.

DBS consumer analyst Andy Sim said a bidder with expertise in the brewery segment who could improve Sabeco’s operations might have an edge in the bidding process.

"I think eventually the sale of Sabeco will come down to pricing and also what a partner can bring to the table in terms of expertise running a brewery as well as research and development capabilities,” Sim told FinanceAsia. “So international brewers with well-known brands could have a slight perceived advantage.”

Sim expects TCC to buy Sabeco through its Fraser & Neave unit, which is expected to be flush with cash after the sale of its stake in Myanmar Brewery, a transaction with an estimated worth of S$1.2 billion ($881 million).

In October last year Fraser & Neave, locked in a dispute with Myanmar Brewery, was compelled by an arbitration tribunal to sell its 55% stake in the brewery, with valuation to be determined by an independent valuer.

“We believe FNN's [F&N] management would be keen to reinvest the proceeds into other areas, particularly to ‘claw back’ the loss in earnings arising from the Myanmar Brewery divestment if it eventually happens,” Sim wrote in his report.

TCC Assets and Thai Beverage hold 59% and 28.5% of Fraser & Neave, respectively.

If TCC emerges as the successful bidder, it would be the second deal struck by the group in Vietnam. Last year, Berli Jucker, a Thai company controlled by Charoen, struck a deal to buy German retailer Metro's cash and carry business in Vietnam for an enterprise value of €655 million.

Thirst for deals

Charoen Sirivadhanabhakdi has been a prolific dealmaker. Born and raised in Songwaad, Bangkok's Chinatown, he started his own trading business at a young age. The company initially supplied products to distilleries, becoming a distiller in its own right after it was awarded concessions to produce liquor. 

The group has radically transformed itself through overseas acquisitions and diversification. According to data provider Dealogic, TCC group and Thai Beverage have bid for $17.4 billion worth of acquisitions since 2010.

The push overseas has been driven by the need to diversify. Like many families in Southeast Asia, Charoen-owned companies already have a dominant market share at home, leaving little room to grow. “We did the analysis of the source of income of the family and we realised that Thailand made up more than 90% of the income three to four years ago,” said Bijananda.

“We have an 80-90% market share in some of the businesses in Thailand and growth depends on the GDP of the country. That’s the reason why TCC is acquiring companies outside Thailand,” he added.

Thailand's GDP grew by a muted 0.7% for the full year 2014, with exports and domestic consumption remaining anaemic after a military coup in May. 

Despite its recent acquisitions, TCC is hungry for more deals. “We are looking for more acquisitions. When we bought F&N, we lost APB [Asia Pacific Breweries] ” to another bidder, said Bijananda.

“We want to grow our business, particularly in the beverage and beer business in this region, and we are looking for opportunities. Our chairman looks forward to build an APB-like company in the near future,” he added.

Former Asia Pacific Breweries CEO Koh Poh Tiong now works at Fraser & Neave, along with other former APB employees.

Charoen has not been one to shy away from a fight. He fought off a consortium led by OUE in the bidding war for Fraser & Neave while last year Frasers Centrepoint beat down rival Stockland in the bid for Australand

Despite that, according to Bijananda, the company is not keen on hostile takeovers. “We don’t want a hostile situation, we want a win-win,” he said.

A earlier version of this item incorrectly stated that F&N had already sold its 55% stake in Myanmar Brewery. The deal is pending.

¬ Haymarket Media Limited. All rights reserved.