KKR-backed Masan seeks Vinacafe unit to tap consumption

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Vinacafe Bien Hoa Joint-Stock Co., a unit of Vietnam's second-biggest coffee exporter, said it received a VND1.07 trillion (US$51 million) takeover bid from Masan Group Corp. as it targets increased consumer spending.

Masan Consumer Corp., a subsidiary of Masan Group and partly owned by KKR & Co., plans to buy 13.32 million Vinacafe shares for VND80,000 apiece, for a 50.11 percent stake, Vinacafe Bien Hoa's Deputy General Director Le Hung Dung said by phone Tuesday. Masan spokesman Brad Jaffe didn't respond to requests for comment by phone and e-mail.

Masan Group told investors in April it had a "war chest" of as much as $500 million for acquisitions. Vietnam's young population is stoking consumption, making smaller companies in the sector targets for takeovers as they offer higher margins, growth and protection against accelerating inflation, said Adrian Cundy, head of research at VinaSecurities Joint-Stock Co.

"Consumption has been growing steadily even with uncertainty about the macro-economic situation," said Chris Freund, managing partner at Mekong Capital, which sold its Masan shares in November after they doubled in value. "If you look at how quickly they've been growing, it's a reflection of the market they're operating in."

"That's the price they offered," Vinacafe's Dung said. "Our price at this point is different." Masan Consumer calculated the price to comply with a government rule that takeover offers exceed the average price over 60 days prior to the date of the bid, he said. The coffee producer's board will discuss the offer at a meeting on September 13, he said.

Viet Capital Securities Joint-Stock Co. is the "agent" for Masan's acquisition, Vinacafe said in its statement. Vietnam National Coffee Corp., known as Vinacafe, has a 37 percent stake in Vinacafe Bien Hoa, after selling 13 percent in May, according to a statement on the exchange's website that didn't disclose who bought the shares.

Market leader

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, the company said in April.

"Masan appears to be executing on its stated acquisition strategy," Cundy said. "Coffee is a big part of the Vietnam consumer story, and they are buying a controlling stake. For Vinacafe, it shows that control and good consumer brands are worth a market premium."

VinaSecurities, the securities unit of the country's biggest fund manager, collaborates with Macquarie Group Ltd., Australia's biggest investment bank, on equities and corporate finance in Vietnam.

Masan Consumer agreed in April to sell a 10 percent stake to KKR, the investment firm managed by Henry Kravis and George Roberts, for $159 million, in the largest private-equity investment in Vietnam. New York-based KKR is betting Vietnam's young population and growing middle class will help it generate returns even amid inflation concerns.

Vietnam's retail sales rose 22.2 percent in the first eight months of this year from the same period last year, according to the General Statistics Office.

Vinacafe was the country's second-biggest coffee exporter measured by the 2010 crop, according to Vietnam Coffee and Cocoa Association. The largest is Vietnam Intimex Joint-Stock Corp.

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