Mekong makes partial exit from Vietnam's Loc Troi

Loc Troi debuted on the Unlisted Public Company Market exchange on July 24, closing at VND58,300, valuing the business at VND3.92 trillion ($172 million). As of mid-morning trading on July 26, the stock had fallen to VND53,200.

Mekong sold approximately 3.1 million shares in the company for VND68,000 apiece, generating proceeds of around VND209 billion, and reducing its stake from 6.1% to 1.49%. The PE firm said the partial exit had delivered a 3.5x gross multiple and a gross IRR of around 18.6% in US dollar terms. This includes dividends paid out during the eight-and-a-half year holding period.

Mekong has an agreement to sell its remaining shares at the same price no later than September. SCPE and PENM have not disclosed whether they also made full or partial exits.

Vietnam Azalea Fund – a vehicle launched by Mekong in 2007 to focus on pre-IPO investments – committed $4.4 million to Loc Troi in December 2008. The fund made seven investments and Loc Troi is one of two that have yet to be fully exited. Mekong is currently deploying its fourth vehicle – Mekong Enterprise Fund III – which closed at $112 million in May 2016.

Loc Troi was established in 1993 as a crop protection chemicals business based in the Mekong Delta. Its distribution network comprises 25 branches, more than 5,000 dealers, and a team of 1,300 agricultural engineers who provide technical support services to farmers. Most of its products are sourced from Syngenta. Loc Troi is also Vietnam’s second-largest seed supplier.

Over the years, the company expanded from distribution into manufacturing. Two crop protection chemicals processing plants were built with an annual capacity of 5,000 tons. Loc Troi also established a seed research and production center as well as several rice mills. Its Hat Ngoc Troi rice brand is now sold domestically and internationally.

SCPE invested $90 million in Loc Troi in September 2014 for a significant minority stake. As part of that transaction, VinaCapital sold its 23.6% interest in Loc Troi for $63.1 million, generating an IRR of 23.7% over a five-year holding period. Deutsche Asset Management also exited its interest, securing an IRR of 19.7% and a multiple of 1.7x. They made their investments between 2009 and 2011.

Loc Troi reported revenue of VND7.78 trillion in 2016, a slight decrease on the previous year, although sales have grown about 60% since 2011. Net profit came to VND347 billion in 2016, up from VND319 billion in 2015.

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• Topics
• Southeast Asia
• IPO
• Industrials
• Vietnam
• Mekong Capital
• Agriculture
• Standard Chartered Private Equity
• PENM Partners