Warburg Pincus makes debut Vietnam investment
Warburg Pincus has made its first investment in Vietnam, leading a consortium that will pay $200 million for a 20% stake in the retail property platform of Vingroup, the country’s largest private-sector real estate operator.
In addition to buying an equity interest in the business, Warburg Pincus will contribute up to $25 million in future capital raising by Vingroup while the consortium has the opportunity to invest another $100 million in the retail property platform.
The first stage of the transaction is expected to close by the end of the second quarter.
Known as Vincom Retail, the platform is Vietnam's leading owner and operator of shopping malls, with seven assets valued at approximately $1.1 billion. These projects are based in Ho Chi Minh City and Hanoi, but the company wants to build 25-30 shopping malls nationwide over the next 4-5 years, and this will involve entering second-tier cities.
Warburg Pincus claims this is the largest ever initial investment in a Vietnamese company by a global private equity firm. It tops the $159 million that KKR paid for a 10% stake in Masan Consumer Corp. in 2011, although the PE player followed up with a second commitment of $200 million in January of this year.
Warburg Pincus' investment is also one of only seven in Vietnam to reach $100 million or more, according to AVCJ Research.
Vingroup first raised capital via global capital markets in 2009 and most recently generated $300 million through a convertible bond issue last year. Its has projects in the residential, office, education and healthcare spaces as well as in shopping malls. It expects to post more than $1 billion this year in property sales, plus another $200 million in recurring revenues.
Joseph Gagnon, managing director at Warburg Pincus, described Vingroup as "not only the dominant real estate developer in Vietnam but one of if not the leading private enterprises in Vietnam."
He added that the investment is a proxy for the country's rapid urbanization and emerging middle class, noting that Warburg Pincus expects the development seen in China over the last decade to be played out in Vietnam over the next decade.
Le Thi Thu Thuy, Vingroup's vice chairwoman cum CEO, said that Warburg Pincus' capital and support would not only accelerate the rollout of planned shopping mall developments, but also enable the company to pursue opportunities in high-growth urban districts in Vietnam.
Vincom Retail's portfolio includes Vincom Center B in Ho Chi Minh City and Vincom Center Ba Trieu in Hanoi. It has two more shopping malls in Hanoi - Vincom Mega Mall Royal City and Vincom Mega Mall Times City - scheduled for launch later this year.
Warburg Pincus' investment comes from its most recent global fund, which reached a final close of $11.2 billion in early May. Charles R. Kaye, the private equity firm's co-president, is speaking at the AVCJ China Forum, which takes place in Beijing on May 30-31.
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