The $250 million investment from Bain Capital into Masan Group stands among Vietnam's three largest equity deals in 2023.
According to research by GlobalData, the total number of merger and acquisition (M&A) deals in Asia-Pacific decreased by 11.6 per cent in the first 10 months of 2023. As part of this general trend, Vietnam's M&A market is also declining, especially compared to its peak in 2021, which saw a total deal value of more than $10.8 billion.
According to KPMG's data, in the first 10 months, Vietnam’s M&A market recorded 265 deals worth $4.4 billion. It is forecast that the market is unlikely to reach the total value of $6.8 billion that was seen last year.
The slowdown of M&A activities is attributed to the fact that the US Federal Reserve has raised interest rates over the past two years, which has led to a wave of interest rate hikes globally. As investors' capital costs are higher, they have tended to become stricter in selecting investment opportunities.
Masan has led capital mobilisation rounds worth billions of dollars over the past few years. Danny Le, CEO of Masan Group, said that at a time when the cost of capital is high, investors only have medium levels of patience.
Previously, investors were happy to wait and see if the company could develop into a profitable business. However, "The period of investors accepting losses at a company valued at billions of dollars is over," he noted.
Amidst the challenging environment, Vietnam's financial market in general, and its M&A market in particular, are considered attractive to international investors thanks to the nation's political stability, impressive economic growth, and rapidly growing domestic market.
In particular, the consumer retail market in the country has huge potential and ample room for growth. In a report released earlier in the year, J.P. Morgan underscored that, "Vietnam stands out as the most captivating and extraordinary narrative of consumer growth within the Asian region."
Despite its attractiveness, experts have said that only companies with strategic vision and comprehensive execution can successfully mobilise foreign capital.
On December 6, Bain Capital agreed to increase its equity investment into Masan Group to $250 million from the previous $200 million announced in October. Despite the recent volatility and challenges in the financial markets, the increased sum from Bain Capital is strong validation of Masan’s long-term strategy and near-term outlook. Masan may even increase the investment up to $500 million, subject to capital needs and market conditions.
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, 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 (MSN) shares.
There are no hedging structures or stock borrowings of MSN shares as part of the equity investment that would result in them needing to be sold on the open market at the date of the issuance. Bain Capital’s interests are fully aligned with those of the current MSN shareholders.
Jefferies Singapore Ltd. and UBS AG Singapore Branch acted as the financial advisors to Masan Group. Masan expects the transaction to close in the next few months and continues to explore other strategic alternatives for equity capital.
Masan is continuously investing in the available platforms and constantly innovating to capitalise on the recovery of the consumer market. The group aims to increase its profits exponentially during the golden time of the consumption story in Vietnam.
|Bain Capital's investment in Masan Group is one of the three largest equity investment deals in Vietnam in 2023. The two other deals were Sumitomo Mitsui Banking Corporation's acquisition of a 15 per cent stake in VPBank for $1.4 billion and ESR Group’s purchase of a stake in the warehouse leasing company, BW Industrial, for $450 million.
|Bain Capital leads Masan Group's equity funding round
Bain Capital, a leading private investment firm with approximately $180 billion of assets under management, has agreed to invest at least $200 million of equity capital into Masan Group Corporation (HSX: MSN).
|Why did Bain Capital choose Masan for its first strategic investment in Vietnam?
There are many compelling reasons for Bain Capital to choose Masan as its first strategic investment in Vietnam.
|Bain Capital to inject another $50 million into Masan
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.