ASF crisis strikes down CJ ambitions

14:43 | 05/12/2019

South Korean conglomerate CJ Group has suffered a huge setback due to the African swine fever crisis as the corporation has been forced to cancel all deals across its entire feed and farm operations in Southeast Asia, including in Vietnam, ruining the progress of long negotiations.

asf crisis strikes down cj ambitions
ASF crisis strikes down CJ ambitions

In the opinion of a VIR source, Seoul-based CJ Cheiljedang Corporation, part of CJ Group, is suffering the most from the onset of the disease (ASF) among feed and farm companies, at a time when it was attempting to exit the industry altogether.

In May, Dutch group Nutreco was reportedly in advanced talks to buy CJ’s animal feed business. Such a deal was reported to be worth about $1.7 billion, covering over 30 feed mills in South Korea, Indonesia, the Philippines, China, Cambodia, Myanmar, and Vietnam.

The group was also negotiating to sell its entire catalogue of farms to Chinese conglomerate New Hope Group, which already has 600 subsidiaries in 30 countries active in agriculture, consumer goods, industrial resources, and real estate. It is especially prominent in livestock and animal feed, and is the second-largest feed producer globally. The group currently boasts eight feed mills in Vietnam.

However, negotiations have fallen apart due to the outbreak of ASF, which has caused significant damage to almost all of CJ’s feed and farm companies, especially the two additional factories recently launched in Vietnam.

“Had ASF not reared its head, CJ would have rolled up the sale of all feed mills to Nutreco and its farm chain to New Hope. These deals now seem to be cancelled,” VIR’s source said.

VIR contacted Chang Bok Sang, president and CEO of CJ Group Vietnam, regarding the deals but have yet to receive a response.

Latest figures made available this month from the World Organization for Animal Health show that 5.8 million pigs have been culled in Vietnam since the outbreak of ASF.

In addition, nearly a third of the 63 cities and provinces across the country have reported a death toll of at least 100,000 pigs.

Instead of the bleak outlook for feed and farm fields at present, Vietnam used to be the most important strategic investment area for CJ Group, which had been concentrating resources on investment and development. The group was dedicated to achieving the targets of its Great CJ Plan 2020.

CEO Sang said at the inauguration ceremony of the Vina Agri plant in the northern province of Ha Nam in January last year, “We are committed to maximising investment to achieve the Great CJ 2020 medium- and long-term revenue targets of $100 billion globally, and Vietnam is our bright spot to achieve that goal.”

Covering an area of 75,000 square metres in Dong Van II Industrial Zone in Duy Tien district, the Vina Agri Ha Nam plant has the total investment of VND561 billion ($24.4 million) with estimated capacity of about 300,000 tonnes per year.

Last September, the group also hosted the opening ceremony for the $13.6 million Vina Agri plant in the central province of Binh Dinh. Kim Sun Kang, general director of CJ Vina Agri, said, “We have now opened a new chapter, and the role and mission of the future CJ Group is here in Vietnam.”

CJ Vina Agri opened for business in Vietnam in 2001 with the launch of the Long An plant. Hung Yen was inaugurated five years later and, in 2008, the company built Vinh Long factory, which specialises in the production of fish feed.

In 2015, CJ inaugurated the Dong Nai factory, the last before 2018’s new arrivals in Ha Nam and Binh Dinh. CJ Vina Agri is also building a factory in the Mekong Delta region, bringing the total number of animal food processing plants to seven.

Along with the animal feed segment, CJ Group has raised its ownership level in local food businesses several times over the past few years. It bumped up the ownership rate in Cau Tre from 51.6 to 71.4 per cent, and subsidiary CJ Cheiljedand Corporation bought 64.9 per cent of Minh Dat Food's capital in 2017. The previous year, the corporation also purchased 4.18 per cent of Vissan JSC’s stocks.

CJ Group once pledged to invest $500 million more into Vietnam in 2016 for new projects and mergers and acquisitions in order to make Vietnam its third-largest investment destination by 2020, following South Korea and China.

Meanwhile, the total investment of the group into the country over the last 20 years reached only $400 million – and promises to more than double that number could all go up in smoke as it is looking to sell its entire feed and farm operations in Vietnam.

Oanh Huong

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