Standard Chartered picks up stake in leading agro firm

Asset management firm VinaCapital announced late last month that its Vietnam Opportunity Fund (VOF) had reached a deal to sell its entire stake in An Giang Plant Protection Company to Standard Chartered Private Equity – a subsidiary of Standard Chartered Bank.

Accordingly, VOF will sell its 23.6 per cent stake in An Giang Plant Protection for $63.1 million in cash, or $4.10 per share, representing a 23.7 per cent internal rate of return over a period of five years.

Initially, VOF invested in An Giang Plant Protection as a private equity investment and has seen it become a public company with over 100 shareholders. The replacement of VOF by Standard Chartered Private Equity is expected to create positive change in An Giang Plant Protection, a leading Vietnamese agriculture company.

“I believe Standard Chartered Private Equity is well aligned with An Giang's mission and vision, so after this transaction there is a very strong alignment between the board and the shareholders in terms of how the business will grow and what the priorities are over the coming years,” said Chris Freund, partner of Vietnam-focused fund management firm Mekong Capital, which is also investing into An Giang through its Vietnam Azalea Fund.

“Standard Chartered Private Equity’s global presence and its experience as an investor in agricultural companies in other countries will be useful for An Giang,” Freund continued.

Founded in 1993, An Giang Plant Protection Joint Stock Company is the leading distributor and a manufacturer of crop protection chemicals (CPC) in Vietnam.

With a nationwide distribution network of 25 branches and nearly 500 large-sized wholesale agents, the company controls 30 per cent of CPC market share. Since 2010, An Giang has expanded into the rice processing and trading business, with a goal of becoming the leading vertically-integrated agricultural service provider in Vietnam by 2015.

As a result of this strategy, An Giang had five rice factories in operation by the end of 2013, each with a maximum designed processing capacity of 200,000 tonnes of paddy rice per year. In the next four years, the domestic leading agricultural company plans to develop 12 rice processing factories serving the total farming area of 316,000 hectares, equivalent to 8.1 per cent of the Mekong Delta’s farming area.

Freund said a customer focused development strategy was key driver in the strong growth of An Giang over the past year. In addition, AGPPS is a unique company in Vietnam in terms of the power of its mission and the degree to which its team members and passionate about and aligned around the company's mission. This is a reflection of the excellent leadership of the Chairman, Huynh Van Thon.

According to VinaCapital, in 2013 An Giang reported revenue of $354 million, an increase of over 17 per cent on-year. During the same period, the company’s earnings grew over 18.8 per cent, reaching $24 million.

Revenue for the first half of 2014 was approximately $200 million, roughly half of the company’s full year target of $399 million, while first half 2014 net income was $12 million. Given the success of An Giang, stakeholders see this company as a quality investment.

“This significant divestment highlights the quality of VOF's overall investment portfolio,” said Andy Ho, VinaCapital’s chief investment officer.

The price that VOF sold to Standard Chartered Private Equity, at $4.10 per share, also brings a bright outlook for other shareholders at An Giang.

“The price of this transaction represents a 4.2x return for Vietnam Azalea Fund and a 31.1 per cent investment return ratio in USD. While this return is attractive, we still believe there is a lot of upside in the company and there is a role for us to play, which will also lead to significant growth opportunities,” said Freund.

Since becoming the shareholder of An Giang, Mekong Capital has been working closely with the company in some areas such as the management reporting systems, evaluating ERP software, building the domestic rice business, and creating alignment between the various stakeholders to empower the company's mission of transforming agriculture, and the lives of farmers in Vietnam.

“We would like to continue as a shareholder in the next phase of An Giang’s expansion, as it becomes more of a total solutions provider to farmers, and also continues to expand its vertically integrated rice business,” he added.