Sabeco targets two-stage share sell-off and courts strategic partner

Sabeco shares allured many investors in anticipation of the firm and the beer industry’s good prospects

Two blocks of shares will be sold, with the first to reduce the state’s position in the firm from 89.59 per cent to 65 per cent, and then later down to 40 per cent, according to a ministry official.

The first sell-off will see a 20 per cent stake of the company, or 128,257,000 shares, sold to Sabeco’s strategic partner, which has yet to be named but is familiar with Sabeco’s stockholders. Around 5 per cent will be sold to the public, raising some VND2.2 trillion ($104.76 million) for the government.

Sabeco started focusing on attracting and selecting strategic partners in early 2008, when it convened a general shareholder meeting to commence operations under a joint stock model. In late 2012, three leading foreign brewers, including Heineken, Asahi, and SAB Miller, as well as two other finance and securities firms expressed interest in investing in the company. But so far Sabeco has only floated its shares on the Unlisted Public Company Market (UPCoM) and has not yet announced an agreement on any specific strategic partner.

Under the law, if Sabeco wants to list shares on the Ho Chi Minh City or Hanoi bourses, it will need a strategic partner holding at least a 20 per cent stake.

At present, the Ministry of Industry and Trade (MoIT) has the power to exercise authority over the state’s 89.54 per cent ownership in the corporation.

According to the MoIT’s Vietnam Beer Development Plan 2013, Sabeco is leading in Vietnam’s beer market with 44.59 per cent market share. Global brands such as Heineken, Tiger and Larue only account for 22 per cent.

In terms of its competition with Heineken, Sabeco has a greater production capacity and has nearly double the sales.

Asahi and SAB Miller are also overshadowed by Sabeco. While the formers focus primarily on Hanoi and Ho Chi Minh City, Sabeco has a nationwide distribution system. Sabeco has also invested into having the most modern breweries in the country.

Despite global brand awareness, international firms are struggling to compete with Sabeco, and if they join the firm as a strategic partner, given the direct competition between their respective products, there would undoubtedly be conflicts of interest. 

In its first January 2008 auction, Sabeco successfully raked in VND70,003 (about $3.29) per share. If a 20 per cent stake is sold, the minimum unit price is likely to be around this number, which would earn the beer giant VND8.97 trillion ($427 million).

This year Sabeco is targeting a sales volume of 1.33 billion litres, an increase of 1 per cent against 2013 with total turnover of VND29.44 trillion ($1.38 billion), up 3 per cent on-year. It forecasted before-tax profits of VND3.67 trillion ($170 million), up 3 per cent on-year.

According to Sabeco’s quarterly report, the company’s first quarter after-tax profits reached VND586.49 billion ($30 million), a drop against the same period last year.