On December 6, Masan Group Corporation announced that Bain Capital has agreed to increase its equity investment into Masan Group to $250 million from the previously announced $200 million.
The transaction terms remain as per the initial agreement that was made in October. The proceeds will be used to strengthen the company’s financial position and de-leverage Masan's balance sheet.
Despite the recent market volatility, the increased sum from Bain Capital is a strong validation of Masan’s long-term strategy and near-term outlook, coming on the back of its strong momentum in the third quarter of this year.
The combined earnings before interest and taxes of Masan’s consumer-retail businesses – Masan Consumer Holdings, WinCommerce, Masan MEATLife, and Phuc Long Heritage – grew by 45.5 per cent and 47.3 per cent on-year in the first nine months and the third quarter of 2023, respectively.
Its free cash flow consistently improved, reaching VND2.2 trillion ($90.6 million) in 3Q, compared to VND125 billion ($5.15 million) in 3Q/2022. This was primarily driven by more effective working capital management.
According to Kantar Worldpanel, in 3Q, the fast-moving consumer goods markets only recorded 6 per cent on-year growth in four key cities in Vietnam, and 7 per cent in rural areas. Meanwhile, on a like-for-like (LFL) basis, Masan Consumer Holdings’ revenue grew by 9 per cent on-year and its earnings before interest, taxes, depreciation, and amortisation (EBITDA) grew by 20 per cent on-year in 3Q. The management expects Masan Consumer Holdings’ operating profit to continue its double-digit growth in 4Q.
In November, after a period of format innovations and efforts to enhance operational efficiencies, WinCommerce started to deliver improvements in its daily store revenue with on-year LFL growth approaching positive results after a decline of 10 per cent on-year in 1Q. The current momentum gives management confidence in positive LFL growth in December, which will support the overall profitability profile of WinCommerce.
The transaction is an equity investment in the form of Convertible Dividend Preference Shares (CDPS) to be issued at a price of VND85,000 ($3.50) per share, which can be converted into ordinary shares at a 1:1 conversion ratio.
In addition to the normal dividends payable (if any) to the company’s shareholders, the CDPS has no preference dividend for the first five years. This is then followed by a 10 per cent preference dividend at par value of each outstanding CDPS per annum from the sixth anniversary onwards. On the tenth anniversary of the issuance, the outstanding CDPS will be mandatorily converted into ordinary Masan Group shares.
There are no hedging structures or stock borrowings of MSN shares as part of the equity investment that would result in MSN shares needing to be sold on the open market at the date of the issuance. Bain Capital’s interests are fully aligned with MSN's current shareholders.
Masan expects the transaction to close in the next few months and continues to explore other strategic alternatives for equity capital, which may include diluting its interest in non-core businesses to strengthen its liquidity profile and achieve a sustainable net debt to EBITDA ratio below 3.5x on a steady-state basis.
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