After acquiring Hoang Anh Gia Lai Sugar Limited in Laos, Thanh Thanh Cong-Bien Hoa has found a strategic partner to enter the ASEAN and the EU markets.
|Thanh Thanh Cong Sugar is preparing to larger market access under the EVFTA and ATIGA |
The $60 million transaction
In December 2018, the Board of Management at leading sugar maker Thanh Thanh Cong-Bien Hoa JSC (code SBT on HSX) officially announced plans to sell preferred convertible stock equal to nearly 8 per cent of its stakes after a successful issuance through a private placement to foreign strategic investors.
Accordingly, SBT envisages selling to foreign strategic investors more than 44.4 million convertible preferred stocks.
The minimum price was proposed at VND30,000 ($1.3) and the highest was VND45,000 ($1.95), meaning that the company would raise at least $60 million through this stock issuance.
The preferred dividend duration will last for 6.5 years, with a fixed dividend ratio of 5.5 per cent per annum in the first 1.5 years, after which SBT and the investor will negotiate a new dividend rate.
SBT’s representative said that the corporation’s management board is looking forward to long-term cooperation with the strategic investors who are willing to provide support in strategy, management experience, capital, as well as business operations.
This is the first time a Vietnamese sugar company makes a strategic capital raising deal of international significance, which makes this hand-shake a milestone not only for SBT but also for the domestic sugar industry.
SBT has not yet published the investor’s information, but Ho Chi Minh City Securities Corporation (HSC) thinks that this strategic investor is likely a European investment fund.
Opportunity from EVFTA and ATIGA
This $60 million SBT will use to repay part of the loans it has borrowed to conduct activities, such as buying the material growing area and sugar plant of Hoang Anh Gia Lai Sugar Limited in Atttapeu (Laos) and expanding the production of organic sugar at this plant.
Previously, the European Commission passed two EU-Vietnam trade and investment agreements, opening the way for the signing of the EU-Vietnam Free Trade Agreement (EVFTA) in early 2019.
After signing the EVFTA, the two sides will do away with most tariffs lines in seven years to facilitate commercial activities. The EU will apply a priority import mechanism on Vietnamese produce, including rice and sugar cane.
SBT also expects to increase its revenue after the ASEAN Trade in Goods Agreement (ATIGA) comes into force in 2020, completely eliminating tariff quotas on sugar.
SBT has foreseen the high potential of the Attapeu material area in Laos and acquired it from Hoang Anh Gia Lai Sugar Limited to complete its value chain to bring the SBT brand outside Vietnamese borders.
SBT’s very first organic sugar products produced in Attapeu are ready to be exported to the EU, catching the recovery cycle of the sugar industry.
SBT has signed with the UK’s ED&F Man Sugar Company on selling organic sugar produced at TTC Attapeu and other sugar products in the 2018-2019 season to Europe.
Exporting products to the EU will help SBT diversify its consumer markets, avoiding dependence on its existing markets consisting of the domestic market and 14 export markets, like America, Europe, Asia, and Africa.