VinaCapital, Daiwa sell stake in Vietnam dairy producer

They have agreed to sell a 28% stake to Blue Point, a local strategic and financial investor in the consumer goods sector. Financial terms were not disclosed, although VinaCapital said it would achieve a 1.5x return.

In 2014, VinaCapital and Daiwa paid $45 million for a 70% interest in IDP. VinaCapital held an approximately 55% stake through the Vietnam Opportunity Fund (VOF), a closed-end fund listed on the London Stock Exchange. Prior to the partial exit, it was the largest single private equity investment in the fund, accounting for 4.1% of net asset value (NAV). This implies VinaCapital's overall position in IDP was worth $35.8 million. 

Founded in 2004, IDP is a producer of flavored milk and yogurt products in south Vietnam. When VOF invested, the company was known as Bavi - after the province in which the fresh milk is sourced - and in distress. The first 18 months were devoted to restructuring, addressing the capital structure, fixed assets, and product portfolio. 

The fruits of these labors began to emerge in 2018, when IDP generated revenue growth of 12% in the first six months while competitors posted declines. With cost savings also playing a role, the company returned to profitability in 2018. IDP posted revenue of $76.5 million and a net loss of $1.7 million in 2014. In the first six months of 2019 - full-year figures are not disclosed - revenue and net profit came to $33.6 million and $2.4 million, respectively. 

VinaCapital claims to have helped improve domestic sales and exports through a revised trade strategy and attractive consumer promotion programs; switched marketing from traditional to digital channels; identified savings on raw materials without sacrificing quality; made major cuts in administrative expenses; and consolidated manufacturing facilities to save on operational costs.

"Today, it [IDP] is recognized nationwide through a strong portfolio of products and family of brands. Our new co-investor is a natural partner for us to partially exit our holding, and we welcome their involvement to further push and accelerate IDP into its next phase of growth," said Andy Ho, a managing director at VinaCapital, according to a statement. 

At the end of May, private equity investments comprised more than a fifth of the total assets held by VOF. NAV was down 6.4% year-on-year to $874 million as of July 8. This was blamed on the impact of COVID-19 on the Vietnamese economy.

The country appears to have dealt with the pandemic more effectively than any other Southeast Asian country. No deaths have been associated with the virus. The IMF projects Vietnam will post GDP growth of 2.7% this year, the strongest in Asia. However, economists warn that the country's reliance on exports could prove a vulnerability.

Founded in 2003, VinaCapital has $3 billion under management across a range of asset classes including private equity, real estate, fixed income, and venture capital. VOF is one of numerous funds and segregated accounts. It also has joint ventures with Draper Fisher Jurvetson in venture capital and Warburg Pincus in hospitality and lodging.

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• Topics
• Southeast Asia
• Trade sale
• Consumer
• Vietnam
• VinaCapital