KKR shows its conviction in Masan

To put the size of the PE firm's bet in perspective, the second-biggest investment in Vietnam's consumer and retail space came in 1998, when UK strategic player Tate & Lyle, International Finance Corporation (IFC) and Vietnam Fund Management together put $85 million into a joint venture with Nghe An Sugar.

The rest of the top 10 is populated by deals around the $10 million mark, including two commitments to Masan, made by VinaCapital and Mekong Capital in 2007 and 2009, respectively. Mekong exited its holding in November 2010, securing a gross return multiple of 2x and a gross IRR of 61% on shares sold over an 18-month period.

KKR has been invested in Masan for only slightly longer and clearly likes what it sees. "Doubling our investment in less than two years demonstrates our strong conviction in Vietnam's growth story, Masan Group as our partner of choice in Vietnam and Masan Consumer as a leading Vietnam consumption platform," said Ming Lu, head of KKR in Southeast Asia.

Masan was set up in 2000 as a subsidiary of Ho Chi Minh-listed Masan Group. It manufactures and distributes food and beverage products, including fish sauce, soya sauce, chili sauce, instant noodles, instant coffee and cereals. With some of Vietnam's leading consumer brands in its portfolio, the company has become the market leader in sauces and instant coffee, and ranks number two for instant noodles despite entering the segment less than a year ago.

The private equity firm first identified Masan as a potential target several years ago while conducting top-down analysis of Vietnam's consumer space, but at the time felt the company was too small. After 2-3 years of rapid growth, that assessment changed.

Masan's sales were expected to reach nearly $500 million in 2012, up from $336 million last year. In 2007, sales stood at just $31 million. Net profit came to $107 million in 2011.

This growth is driven by wider macroeconomic factors as much as by Masan itself. Although GDP growth in Vietnam sank to a 13-year low of 5% in 2012 and there are concerns about credit growth as banks struggle to deal with bad loans, the long-term prognosis is encouraging. GDP per capita doubled to $1,400 in the five years to 2011, while more than two thirds of the population is 16-64 years old and the median age is 26.

MadhurMaini, CEO of Masan Group, says the consumer business is focused on the young middle class, noting Vietnam's consumer story "has long legs." KKR's capital will be used to support expansion, including lateral acquisitions, so that Masan has the scale to go the distance.

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• Topics
• Expansion
• Southeast Asia
• Consumer
• Vietnam
• Southeast Asia
• Consumer
• Growth capital
• KKR