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The top candidate from Thailand

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What price would be reasonable for State shareholders to willingly let go of their holdings but still within the financial capability of buyers, in the context a series of major companies find their cash flows heavily depleted now that Covid-19 has been put under control?

After a time of hush, the divestment at State-owned enterprises (SOEs) has recently been re-heated by the Prime Minister’s Decision 908/QD-TTg approving the list of enterprises with State ownership to undergo this process from now until the end of the year. As per this decision, divestment will be carried out at 120 enterprises by the agencies representing their State ownership with the deadline set to be the end of 2020.

Meanwhile, the process must take place at four enterprises before November 30, 2020, including Song Hong Joint Stock Corporation, Hanoi Construction Corporation, Construction Corporation No. 1, and Vietnam Urban and Industrial Zone Development Investment Corporation (IDICO), all with the Ministry of Construction as their State ownership representative. In case of failure to meet the aforesaid deadline, these four enterprises will have to complete their transfer to State Capital and Investment Corporation (SCIC) by December 31, 2020.

Fourteen enterprises will have been transferred to SCIC for divestment by August 31, 2020, including Saigon Beer-Alcohol-Beverage Corporation (Sabeco) under the Ministry of Industry and Trade. Therefore, according to the above roadmap, the transfer of Sabeco to SCIC will have to be finished before August 31, with the sale of State capital there to be done later, bringing the State ownership down to 0% of its charter capital following the divestment.

Who will buy the State’s stake in Sabeco?

Over the past five years, the deal in which more than 50% of Sabeco was acquired by a Thai billionaire has always been considered a typical example of successful merger and acquisition (M&A) in the financial market of Vietnam. In late 2017, Thai Beverage Public Company Limited, or ThaiBev, through Vietnam Beverage spent US$5 billion buying a stake of 53.6% in Sabeco during the State divestment taking place that year to become the parent company of Vietnam’s biggest brewer. This deal has reduced the Ministry of Industry and Trade’s current stake in Sabeco to 36%.

The business results in the two years after ThaiBev took over Sabeco has indicated this beverage company still fares well, posting steady revenue growth. Its profit, despite a fall in 2018, picked up again in 2019. Specifically, by the end of last year, Sabeco earned nearly VND38 trillion in revenue and nearly VND6.7 trillion in profit after tax, up 5.4% and 24% respectively compared to 2018.

However, since the beginning of 2020, the beer industry has been mired in troubles. First, Decree 100 was promulgated specifying the penalties for drunk driving. As soon as this decree came into force, anyone who has drunk just a little alcohol is not allowed to participate in road traffic, leading to a sharp decline in beer consumption nationwide. Next, the Covid-19 pandemic broke out, causing more disturbance to the production and sales of beer during the time when gatherings were restricted. Such negative effects were clearly reflected in Sabeco’s Q1-2020 business results, evidenced by its revenue and profit dropping to only around VND4.9 trillion and VND717 billion, down 47.4% and 44.4% respectively year-on-year.

Faced with a myriad of hardships in the first six months of the year, Sabeco set a revenue target of VND23.8 trillion, down 37%, and profit after tax just over VND3.25 trillion, some 39% lower than in 2019.

If the influence of the black swan event Covid-19 is not taken into consideration, Sabeco by the end of last year was still the “trump card” of ThaiBev, when the acquisition of the Vietnamese brewery helped increase its revenue from the beer segment to US$4 billion, up 27%, while its profit grew by a half to US$104 million. ThaiBev itself acknowledged such growth came from Sabeco’s contribution to the Vietnamese market, in the context business was weakening in Thailand.

Early this year, it was reported that ThaiBev was looking to conduct its initial public offering (IPO) and have its beer segment, including the Thai brand of Chang and Sabeco, listed on the stock exchange of Singapore, with the aim of raising US$2.5 billion. ThaiBev has recently denied this information, however, affirming there is no intention to resell its business activities in Vietnam in any form. In addition, the Thai group pledged to realize the full potential of its business operations in Vietnam, especially Sabeco, in order to strengthen its position as the largest beverage producer in Southeast Asia and a leader in the beer industry.

In fact, besides the leading position in the domestic beer market, Sabeco proves to be quite attractive to ThaiBev thanks to the list of highly desirable land plots under its possession, all at a prime location and covering a large area in HCMC. Some of these “golden” sites are: the plot of 3,872 square meters at 46 Ben Van Don Street, District 4; the plot of 17,406 square meters at 187 Nguyen Chi Thanh Street, District 5; the plot of 7,729 square meters at 474 Nguyen Chi Thanh Street, District 10; and the plot of 2,216 square meters at 18/3B Phan Huy Ich Street, Tan Binh District. With an approval in principle for the transfer of land use rights, Vietnam Beverage Company (owned by ThaiBev) could reap fat profits from the sale of the aforementioned properties.

In addition to the valuable land use rights, with regard to the long-term strategy, Sabeco is also a “worthy” business for those Thai companies who look to gradually dominate the Southeast Asian market via Vietnam. To strengthen its position in the region, ThaiBev sets a goal of 50% of its revenue sourced from markets outside Thailand. The Vietnamese market is valued at US$6.5 billion and expected to grow spectacularly in the near future thanks to factors related to macroeconomics and the demographic structure of Vietnam.


For the reasons mentioned above, ThaiBev is the best candidate for the transfer of the remaining State holding of 36% in Sabeco. If this Thai group had enough resources at the moment, they would probably be willing to wholly own Sabeco. Then, it would be convenient for ThaiBev to decide on its business strategies, with no need to be afraid of any major shareholders. There may be other investors interested in buying the 36% stake in Sabeco, but even in that case, they are likely financial investors instead of strategic investors since Thaibev currently owns more than 50% of Sabeco.

Now, the price of divestment is an important problem/question.

By Linh Trang

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