SK to become Masan’s largest strategic shareholder

Today (September 19, 2018), Masan Group Corporation (HoSE: MSN) announced that it has entered into a strategic partnership with SK Group. The agreement will enable the two parties to draw on each other’s strengths to accelerate Masan’s and SK’s respective growth strategies. The corporate groups aim to jointly pursue transformational business opportunities in Vietnam and to synergise existing business units.

SK Group is one of the largest corporate groups in South Korea, with s business across energy, chemicals, telecommunications, semiconductors, logistics, and services. SK Group operates globally across more than 40 countries and had a combined revenue of $141 billion as of the end of 2017.

Woncheol Park, representative director of SK Southeast Asia Investment, said: “Vietnam is an important foundation for our Southeast Asia strategy. We believe the partnership model is crucial to win in this region and Masan is an ideal strategic partner for SK. We have a huge respect for Masan’s management team and admire their track record of building successful businesses over the years. We also share the same passion and vision—to create long-lasting social and economic values in the communities where we operate.”

“Their businesses are just starting to reflect true growth potential and we are backing Masan to grow their consumer wallet share by five times to $100 per consumer per annum. We will actively work together to identify strategic opportunities to expand into attractive categories in Vietnam, where SK can add significant value through our know-how and technology. We believe this is the first of many investments with Masan and that this partnership will be a win-win for both groups. We look forward to working alongside Masan immediately to deliver our transformational game plan.”

Commenting on the partnership, Danny Le, head of Strategy and Development for Masan Group, said: “We are excited to welcome SK as our long-term strategic partner at the group level. Masan and SK both believe in being champions in high-growth sectors of scale, developing global businesses, and creating economic and social value for our respective countries.”

“We admire how SK Group has evolved into a global diversified powerhouse. Their invaluable experience, know-how, technology, business platforms, and global network will provide Masan a new dimension to deliver high double-digit growth in the years to come. While the teams will focus on operational synergies in the near-term, we will actively pursue strategic M&A opportunities to deliver exponential growth over the long-term. This is truly a unique partnership where we have a full alignment with our overall top-down strategy as a group.”

SK’s investment of approximately $470 million will entirely comprise of new capital and SK will own 9.5 per cent of Masan Group. The company plans to utilise the proceeds to fund its future growth initiatives, as well as to strengthen its balance sheet.

With a strong balance sheet, Masan will add up to $50 million of net earnings per annum for the full year of 2019, while gross debt to EBITDA is expected to decrease to 2.5x by the end of 2018. Management expects core net after-tax profit to jump by at least 50 per cent in the fiscal year of 2018 and forecast similar base case earnings growth momentum for the 2019 fiscal year as each of its core business continues to deliver on its growth plans.

Masan plans to consolidate cash at the group level by up-streaming free cash flows from its subsidiaries to build a strategic investment war chest and/or return capital to shareholders. The company does not intend to issue additional shares to investors over the next three years.

The transaction is subject to customary regulatory and corporate approvals. Credit Suisse acted as sole advisor to Masan Group.