Vietnam's Masan Group Corporation and SK Group from South Korea on Tuesday announced the signing of definitive agreements for the latter's acquisition of a 16.26 percent stake in the former's VinCommerce for a total cash consideration of US$410 million.
The transaction values VinCommerce at $2.5 billion for 100 percent of its equity, the two sides said in a statement.
Masan and SK share the same view in Vietnam’s Modern Trade Grocery Retail (MT) explosive growth trajectory.
Vietnam’s MT market is expected to increase its share to 50 percent from eight percent of the retail landscape, making the country the fastest-growing MT market in the Asia-Pacific region over the next decade.
SK’s investment validates Masan’s turnaround execution capabilities: store network and assortment optimization, continuous profitability improvement through disciplined commercial margin enhancement, and operating cost-saving rationalization.
As a result, VinCommerce achieved EBITDA break-even in the fourth quarter of 2020 and delivered positive EBITDA in the first quarter of this year.
Management expects to achieve positive EBIT in the second half of 2021.
“We have a strong belief in the potential of Vietnam’s on/off-line retail sector and expect VinCommerce to play a vital role in its modernization," said Woncheol Park, representative director of SK Southeast Asia Investment, which is SK Group’s subsidiary making the investment.
"We are extremely proud of the work Masan Group has done to turn around VinCommerce in such a short period of time and we believe VinCommerce will become the national champion of O2O (Offline to Online) retail in the near future.
"Our investment in VinCommerce is a part of SK’s broader strategy of investing in Vietnam’s fast-growing sectors.
"This is another landmark transaction for SK and reaffirmation of our commitment to Masan Group and Vietnam.”
In 2021, VinCommerce has laid out a clear plan to strengthen its platform to deliver high-growth and sustainable profits: commercial margin improvement of two percent via direct fresh sourcing and strategic supplier contracts, nationwide roll-out of pilot store models by the second quarter of this year, and enhanced supply chain models empowered by auto-replenishment engines shared at Masan’s recent annual shareholder meeting.
“We are excited that our partner, SK, has validated our turnaround initiatives," Truong Cong Thang, CEO of VinCommerce, commented on the partnership.
"The hard work we have done over the last 12 months gives us the foundation to scale up nationwide to serve 30-50 million consumers and their daily essential needs.
"As we continue to drive VinCommerce's promise of 'The Very Best of Fresh,' I believe we will become consumers’ grocery partner of choice.
"I am very proud of the VinCommerce team's passion and dedication.
"This is just the start of our journey to ensure Vietnamese consumers win daily anytime, anywhere.”
Masan is planning to use the proceeds from this transaction, approximately $225 million, to strengthen its balance sheet and to fund future growth initiatives.
Credit Suisse (Singapore) Limited acted as the exclusive financial advisor to Masan Group.
Masan Group’s member companies and associates are industry leaders in branded food and beverages, branded meat, value-added chemical processing, and financial services, altogether representing segments of Vietnam’s economy that are experiencing the most transformational growth.
SK Group is one of the largest corporate groups in South Korea, with businesses across energy, chemicals, telecommunications, semiconductors, logistics, and service sectors.
The group operates globally across over 40 countries and had a consolidated revenue of $86 billion as of year-end 2020.
VinCommerce operates the largest nationwide grocery Modern Trade retail platform in Vietnam with supermarket chain VinMart and minimart chain VinMart+.
It also owns VinEco – the largest vegetable and fruit brand in the Southeast Asian country that is available exclusively at VinMart and VinMart+ stores.