Deal focus: KKR returns to Masan, PENM exits

When PENM Partners backed Masan Food in 2008, the company’s product line was limited to sauces and seasonings, with annual revenue of less than $100 million. But the GP liked both the market opportunity and the management team. “It was clear there was potential to sell branded goods to local consumers at affordable prices, and on a large scale,” says Hans Christian Jacobsen, managing partner at PENM. “We wanted to get involved and we believed in the founder’s vision.”

Eight years on, Masan Food – now known as Masan Consumer Corporation (MCC) – is one part of Masan Group, a domestic conglomerate with interests in financial services and natural resources as well as food and beverage. Revenue came to VND31.3 trillion ($1.37 billion) in 2015. It was an opportune moment for PENM to sell part of its interest in Masan to KKR, which is backing the company in its latest endeavor to bring consolidation and vertical integration to Vietnam’s meat industry.

PENM’s second fund invested approximately $50 million in several Masan entities between 2008 and 2009. As the company restructured its divisions under Masan Group, PENM converted its holdings into shares in the parent, which subsequently listed. The private equity firm sold $100 million worth of shares to KKR, but this represents the last in a string of partial exits. The overall return for Fund II – PENM still owns shares in Masan Group through its third fund – is said to be more than 5x.

KKR also has a history with Masan, having invested $359 million in MCC across two tranches in 2011 and 2013. The exit, completed in 2016, came as Thailand’s Singha agreed to invest $1.1 billion to take the Masan consumer platform to the next level. This established relationship proved crucial as KKR won a competitive process to invest $150 million in Masan Nutri-Science. The decision to buy shares in the parent as well was driven by PENM needing to exit and the view that Masan Group was undervalued.

Masan Nutri-Science is Vietnam’s leading independent animal feed supplier and it is already expanding into mid-stream agriculture. The company has options to buy two existing farms, with 5,000-10,000 sows, and is building a new facility that will have capacity for 10,000 sows in the first phase alone. It also owns a 25% stake in large-scale pork processor Vissan. The plan is to leverage MCC’s consumer goods capabilities to push into the downstream branded meat space as well.

KKR will contribute to this development, relying on expertise from similar investments in China. Across several deals covering meat and dairy, the directive was also to integrate and consolidate with a view to providing high quality and safe food products to an increasingly protein-hungry population. “The ability to provide capital to a scale player, to help them restructure how the industry works, that is a really exciting theme,” says a source familiar with the deal. 

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• Topics
• Southeast Asia
• Consumer
• Expansion
• Trade sale
• PIPEs
• Vietnam
• Growth capital
• KKR
• Agriculture
• PENM Partners