KKR buys Masan stake in biggest Vietnam private equity deal

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KKR & Co. agreed to pay US$159 million for a stake in Vietnamese fish sauce maker Masan Consumer Corp. in the largest private-equity investment in the country.

KKR, based in New York, will buy 10 percent of Masan Consumer, the companies said in a joint statement on Wednesday. It is KKR's first investment in Vietnam and its fourth in Southeast Asia, according to the release. Masan Consumer is a unit of Masan Group Corp.

KKR, founded by Henry Kravis, is betting Vietnam's young population and growing middle class will help it generate returns even after inflation soared to a 25-month high and the country's currency dropped against the dollar. TPG Inc. and BankInvest, a Danish investment fund, bought a $50 million stake in Masan Group in October 2009.

"Most foreign investors are looking beyond the near term and thinking about where this country is going to be in five years if the macro policy gets back on track and inflation comes down," said Adrian Cundy, Ho Chi Minh City-based head of research at VinaSecurities Joint-Stock Co. "Vietnam's young demographic is where investors see major growth and that's the attraction."

Cundy said the agreement marks the biggest private equity deal in Vietnam.

The deal comes as Vietnam struggles to tame inflation that almost reached 14 percent in March and tries to stabilize the local currency after devaluing it for the fourth time in 15 months in February.

Private equity investors are looking to invest in industries like consumer goods, cosmetics and food, where companies can pass on price increases, said Cundy.

"Vietnam is a large country with a young and growing population where there has been considerable economic progress, structural reforms, and a notable increase in living standards," said Ming Lu, a senior operating executive at KKR, in an e-mail. "Demographic and social trends favor the rise of domestic consumption."

Masan Consumer, formerly known as Masan Food, is the market leader in fish, soya and chili sauce and the second largest producer of branded instant noodles in Vietnam, according to Wednesday's statement. Its profit tripled to VND1.25 trillion ($60 million) in 2010 from VND402 billion in 2008.

Goldman Sachs Group Inc. advised Masan Group on the deal.

Mount Kellett Capital Management LP, a US private equity group, said in January it spent $100 million for a 20 percent stake in Masan Resources, another unit of Masan Group that owns a tungsten mine in the country.

"Domestic companies are much more open to accepting partnerships than they previously did," said Cundy of VinaSecurities. "Their valuation expectations are much more realistic than they were two years ago, given the macro issues. That will make it more attractive."

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