KKR finds right partner in Masan

To mark the largest private equity investment to date in Vietnam, Kohlberg Kravis Roberts (KKR), one of the world’s largest and prestigious private equity firms has doubled its stake in Masan Consumer
 


Masan has a sterling portfolio of business interests in consumption and resources, including Masan Consumer that has developed some of Vietnam’s most recognised consumer brands

>> KKR invests additional $200 million into Masan Consumer

>> Vietnam among targets for KKR’s $3 billion Asia fund II

>> KKR buys Del Monte Foods for $4 billion

a subsidiary of Masan Group by investing an additional $200 million to raise its total investment to $359 million in this producer of fish sauce, soya sauce, chili sauce, instant noodles, instant coffee and instant cereal.

In 2011, KKR acquired a 10 per cent stake in the company with its initial investment of $159 million. Madhur Maini, CEO of Masan Group and Truong Cong Thang, CEO of Masan Consumer, have a discussion with VIR’s Tuong Thuy.

What are Masan Group’s goals and strategy for 2013?
Madhur Maini: Over the last few years, we have been focused on building leading consumer and resources platforms. We have achieved this by having a focused business model, hiring the right management team for each platform and bringing in long-term capital.

In 2013, our strategy is to maximise the value of our existing platforms by broadening and deepening them. For the consumer business, it means expanding into new categories. For the resources business, it means commissioning the mine on schedule.

In addition, we need to communicate our value better to our constituents. This means simplifying our corporate and capital structure, deepening our management strength and improving our stakeholder communications.

How does Masan ensure that it will be able to carry out its plans?
Madhur Maini: Execution starts and ends with having the right team. We have a very strong management team at the Group, Consumer and Resources. We achieved this by investing time and effort in hiring and retaining talent.

In terms of leadership, we have a visionary chairman who believes in Vietnam’s intrinsic value and potential, but also welcomes international management and partners, a Consumer CEO Truong Cong Thang who truly understands what Vietnamese consumers want for themselves and their families and a Resources CEO Dominic Heaton, who is one of the best mining operators.

How does Masan Group focus on delivering share holder value?
Madhur Maini: In Vietnam, there are many opportunities, but equally many constraints. It is imperative we focus on a few goals, optimise our allocation of resources and ensure we achieve these goals. For us, strategy is 1 per cent, execution is 99 per cent.

Vietnam is changing very fast as it converges with the rest of the world. For a Vietnamese company to be a leader, we have to be focused on the “Vietnam Value” and have the right platform to compete with multinationals. Therefore, our group motto is “Vietnam Tomorrow, Today”.

What are Masan Consumer’s goals in 2013?
Truong Cong Thang: For 2013, we are very focused on investing in our existing categories and organic growth, where we can strengthen our capacity and market share positions. We currently have a strong operational platform for manufacturing, research and development, distribution and procurement and possess leading brands.

With such a strong operational platform, we do not need to do large merger and acquisition (M&A) transactions, but we may consider doing a few smaller M&A deals that can leverage the platform or advance our goals of expanding into new fast moving consumer goods categories.

How do you decide on your strategy?
Truong Cong Thang: For me, strategy starts and ends with the consumer. As a Vietnamese company, we put Vietnamese consumers first. We do this by making sure our products are healthy, tasty and enjoyable for our customers.

What does the KKR deal mean to you?
Truong Cong Thang: As we grow and expand our product portfolio, it is important that our operational efficiency continues to improve. KKR, with its operational expertise as one of the leading investors in consumer companies, will commit their experts to help us strengthen our operational platform. With better operations, we can serve Vietnamese consumers even better in the near future.

KKR, one of the world’s most famous and prestigious private equity firms, last week announced a $200 million investment into Masan Consumer to deepen its partnership with Masan Group in Vietnam.

Adding the $159 million investment in April 2011, this move means KKR will more than double its investment in Masan Consumer, making its biggest investment in South East Asia.

This is also the largest private equity deal in Vietnam and it added to the group’s record of raising more than $1 billion during the past few years in the country.

KKR will make the new investment by increasing its equity stake through a combination of primary and secondary shares, but did not disclose what stake it now holds in Masan Consumer following its second acquisition.

Ming Lu, KKR’s regional head of South East Asia, said: “Doubling our investment in less than two years demonstrates our strong conviction in Vietnam’s growth story, Masan Group as our partner of choice in Vietnam and Masan Consumer as a leading Vietnam consumption platform.”

As Masan Consumer broadens and deepens its consumption strategy, it will leverage KKR’s global retail and consumer experience and work hand-in-hand with KKR Capstone, a team of operating executives who work exclusively with KKR’s portfolio companies, on instilling world-class business management processes.

Madhur Maini, CEO of Masan Group, said: “Our core belief as a group is the structural consumption growth and rising middle class potential of Vietnam. We believe KKR is the right partner to broaden and deepen our consumption platform to capture this opportunity.”

Masan is one of the largest publicly-listed private sector groups in Vietnam focusing on the country’s consumption and resources sectors. Masan Consumer is currently a market leader in sauces, instant noodles and instant coffee categories.

Masan Consumer CEO Truong Cong Thang said: “Our partnership with KKR strengthens our strategy to diversify into other fast moving consumer goods categories in the near future, to better meet the needs of consumers in Vietnam.”

Masan Consumer has approved an issuance plan for ordinary shares under private placement. The estimated number of new shares to be issued is no more than 15 per cent of the company’s total outstanding ordinary shares on a fully-diluted basis immediately after the completion of the issuance.

The plan will be submitted for the approval of the company’s general meeting of shareholders and the timing of issuance is projected to be within 12 months of the passing of the shareholders’ resolution. The new shares would be issued in one or more occasions and the private placement is for less than 100 investors.

According to the board’s resolution, the company would only issue shares to investors who are reputed foreign institutions and/or strategic partners having the ability and capacity to contribute to the businesses of the company or its subsidiaries and to benefit the company on a long-term basis. The par value would be VND10,000 ($0.5) per share. The new shares would be subject to a lock-up period of one year from the date of completion of the issuance.

KKR currently has over $66 billion in assets under management. The New York-based firm set up its first office in Asia in 2005 and employs almost 100 people in the region. It opened its seventh Asian office in Singapore in October 2012 as the regional headquarters for South East Asia.

The company is also raising a $6 billion Asian fund. In addition to KKR, other large and reputable investors at Masan Group include IFC,TPG, Richard Chandler, Goldman Sachs, Dragon Capital, and Bank Invest.

Tuong Thuy (vir.com.vn)