KKR commits $250 million to second Vietnam consumer play
KKR has entered into a second partnership with Masan Group – just over a year after exiting the first with a more than 2x return – through a $250 million commitment to the Vietnamese conglomerate and its branded meat subsidiary.
The private equity firm has agreed to invest $100 million in Masan Group, buying shares from Vietnam-focused GP PENM Partners, and buy $150 million in new shares in Masan Nutri-Science. KKR will take a 7.5% stake in Masan Nutri-Science, with a view to supporting a similar transition in Vietnam’s meat industry from fragmentation to integration that it has pursued through food investments in China.
Masan Nutri-Science sold more than 2.5 million tons of animal feed last year through its national network of 4,500 dealers and 13 feed facilities, generating approximately $1.1 billion in sales. The company has its own Bio-zeem brand, as well as stakes in Proconco – a Vietnamese-French joint venture – and ANCO. It took full ownership of ANCO last year, buying up a 30% interest.
Steps were also taken towards the creation of an integrated feed-farm-food business model as Masan Nutri-Science broke ground on a large-scale pig farm and entered into a strategic partnership with pig farming and pork processing player Vietnam Meat Industries (Vissan). ANCO took a 14% stake in Vissan as part of the company’s IPO and then increased its holding to 24.9%.
Vietnam’s meat industry is worth $18 billion a year but is highly fragmented and weak in terms of productivity. In addition to pursuing consolidation and vertical integration, Masan Nutri-Science wants to implement a fast moving consumer goods (FMCG) approach to the agricultural business. To this end, Pham Trung Lam, who was previously head of sales at Masan Consumer Corporation (MCC) and now serves as head of business development at Masan Group, will become CEO of Masan Nutri-Science.
“Our team at Masan Nutri-Science are not only professionals, but are entrepreneurs who want to transform the animal protein sector with innovation that increases productivity and brands that consumers trust and love. We have started in the feed, and I look forward to partnering with KKR to complete our story with consumer meat products,” Pham Phu Ngoc Trai, chairman of Masan Nutri-Science, said in a statement.
KKR made its debut investment in Vietnam in 2011, committing $159 million to MCC for a 10% stake. Two years later it doubled down, putting in a further $200 million and increasing its holding to 18.7%. The GP identified MCC – which produces fish sauce, soya sauce, chili sauce, instant noodles, instant coffee and cereals – as a potential target several years earlier but deemed the business too small. However, between 2007 and 2012, sales rose more than 15-fold to around $500 million.
KKR received one dividend payment from MCC and made its exit over the course of three transactions, starting in July 2015 when half the holding was sold back to Masan Group. The last came in January 2016 as part of an agreement between Masan Group and Thailand's Singha to create a food and beverage platform. Singha agreed to invest $1.1 billion in this platform, Masan Consumer Holdings (MCH), and the first portion of $650 million enabled MCH to buy the remainder of KKR’s stake for an undisclosed sum.
PENM first invested in MCC, then known as Masan Food, in 2008. According to AVCJ Research, it paid $27 million for a 10% interest. A year later it subscribed to new shares in Masan Group – AVCJ Research put the deal value at $22 million – and converted its MCC holding into Masan Group shares.
As of December 2015, the private equity firm held 43 million shares, or a 5.76% stake, though its second fund. That vehicle has exited its position to KKR, generating a gross multiple of more than 5x. PENM also holds shares in Masan Group through its third fund.
“Since our first investment nine years ago, we have had the pleasure of witnessing Masan’s transformation from a small seasonings company into one of the largest and fastest growing consumer-focused businesses in Vietnam,” said Hans Christian Jacobsen, managing partner of PENM, adding that this is the firm’s most successful investment in Vietnam.
In addition to MCH, which includes MCC and Masan Brewery, Masan Group’s interests include natural resources and a partial stake in local lender Techcombank. Revenue came to VND31.3 trillion ($1.37 billion) in 2015, up from VND16.4 billion the previous year. Net profit rose to VND2.53 billion from VND2.01 billion over the same period.
KKR is investing in Masan Group and Masan Nutri-Science through its second pan-Asian fund. The firm is currently raising its third regional vehicle, which has an institutional hard cap of $8.5 billion.
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