Turmoil at Sabeco after historic M&A

Turmoil at Sabeco after historic M&A, photo Hong Phuc

Before the Vietnamese state ­divested a major share from the ­company, foreign ­investors held only 9.84 per cent of Sabeco’s charter ­capital. Thus, they were only allowed to purchase a ­maximum of 38.59 per cent stake at the beverages giant, as they were ­restricted by the 49 per cent foreign ownership limit at the ­company.

At the tail end of 2017, the winner at the auction to sell 53.59 per cent of state capital at Sabeco emerged as Vietnam ­Beverage Ltd. (VietBev), in which a Vietnamese entity held 51 per cent. In fact, VietBev came into existence two months before the $5 billion deal. The company’s ­shareholder structure ­includes BeerCo Ltd., which belongs to ThaiBev, a group which is in turn also ­managed by Thai ­billionaire Charoen Sirivadhanabhakdi. BeerCo held a 49 per cent stake in VietBev.

In ­late December 2018, the Hanoi Department of Planning and Investment granted a business registration certificate to ­VietBev. This came after BeerCo contributed VND111.2 trillion ($4.83 billion) to raise VietBev’s charter capital to as high as VND111.9 trillion ($4.86 ­billion).

After the capital hike, VietBev ­became a foreign-invested business with BeerCo holding 99.39 per cent stake, which naturally brought the 53.89 per cent stake at Sabeco into the hands of the foreign owner.

The new acquisition, adding to the previous 9.76 per cent of ownership, pushed international ownership at Sabeco to 63.35 per cent, far ­surpassing the cap.

Regulation dodging?

Commenting on international ­investors holding more than 63 per cent of Sabeco, a senior expert said that the investor might have used a so-called loophole to ­circumnavigate the law and avoid a penalty from ­authorised management agencies.

Last July, VietBev sent documents to the Ministry of Industry and Trade and the section representing the state capital at Sabeco, with a proposal to ­remove several business lines such as rice and sugarcane trading at Sabeco in an attempt to completely ­remove the cap on foreign ownership at the ­company, which would boost the stock’s appeal to investors from other countries.

However, under the government’s Decree No.60/2015/ND-CP date June 26, 2015, amending Decree No.58/2012/ND-CP on the implementation of certain articles of the Law on Securities and the Law on amending and supplementing a number of articles of the Law on Securities, which fixed the maximum foreign ownership cap in companies like Sabeco at 49 per cent.

However, the State Securities Commission, at Document No.7987/UBCK-PTTT dated December 3, 2018 certified, “no restriction to the ownership ratio of foreign investors” in the case of Sabeco. This has paved the way for foreign investors to raise the foreign ownership limit at Sabeco to a total of 63.35 per cent, instead of the ­previous 49 per cent limit.

Possible impacts on labourers

Late last month, over 900 employees with long-term labour ­contracts at Sabeco were asked to ­re-sign their labour contract ­appendix because of a change in the payroll structure.

A Sabeco representative insisted that all labourers related to the ­situation were told of the situation and were given sufficient time to ­understand the contract terms before re-signing any documents.

The contract appendix, however, stated that, “during the 60-day ­probation time, each party can choose to terminate the labour contract ­without earlier notification and is not obliged to pay any compensation.”

It also states that the employer can unilaterally ­terminate labour contracts with ­labourers who failed to complete their duties in a timely manner. This has put pressure on Sabeco employees who might lose their jobs at the ­company any time they fall behind in their work.

In fact, reducing the number of labourers to boost productivity and ­efficiency at Sabeco was initially ­mentioned by industry experts at the time when Sabeco was placed into ­international hands. As of June 30, 2016, the total number of Sabeco employees was 4,649.

According to Sabeco’s documents sent to its stakeholders, the brewer posted VND4.40 trillion ($191.3 million) in post-tax profit last year, which is expected to rise to VND4.72 trillion ($205 million) in 2019. Compared to the post-tax profit of VND4.95 trillion ($215 million) fetched by the company in 2017, it proves that the drastic changes in Sabeco’s ­shareholder structure and the board of management after the ­landmark 2017 auction have cast major impacts on the firm’s business ­outcomes over the first year of ­operation.