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Seafood processor kicks off M&A season
Seafood company Hung Vuong (HVG) has heated the merger and acquisition (M&A) market at the start of the new year by announcing a series of deals worth hundreds of billions of dong as it seeks to expand operations.
In late December, HVG decided to buy 5.63 million shares in animal feed producer Viet Thang (VTF) to increase its ownership from 28.54 to 55.31 per cent.
The shares were purchased from one of HVG's affiliates – Western Hung Vuong Aquaculture Company.
Transaction negotiations were not made public, and the deal was conducted in less than two weeks, starting on January 3.
In return, HVG approved the sale of a 58.33 per cent stake in both Hung Vuong Vinh Long and Hung Vuong Sa Dec, and its entire 90 per cent stake in An Lac Co Ltd to Western Hung Vuong Aquaculture Company.
Hung Vuong's target – VTF – is now the leading animal feed producer in the Mekong Delta region with annual capacity of 350,000 tonnes. The company plans to bring its total capacity to 480,000 tonnes by next year, while also expanding its range of products.
The positive business results of VTF were one of the main factors in HVG's decision to sell so many assets in order to acquire a majority holding.
In 2011, VTF enjoyed record net profits of VND175 billion (US$8.3 million), far exceeding its goal of VND70.38 billion ($3.3 million) despite extreme economic difficulties.
It was aiming for a VND137 billion ($6.5 million) profit in 2012, and achieved 84 per cent of the target in the first three quarters, meanly completion of the yearly plan is likely to be confirmed in the coming weeks.
The purchase will help HVG save huge costs for animal feeding.
In addition, the acquisition of the aquatic feed factory Viet Dan worth VND74 billion ($3.5 million) with a capacity of 100,000 tonnes per year has also increased HVG's production of feed for fish.
Most recently, HVG announced plans buy 5 million shares in Sao Ta Food Co (FMC) for VND52.5 billion ($2.5 million), taking its holding to 38.46 per cent of Sao Ta's new charter capital of VND130 billion ($6.19 million). HVG's overall goal is to become Sao Ta's strategic partner and expand feed exports.
HVG has a history of M&A, having been the first business to use the public bidding method to increase its holdings in An Giang Fisheries Import Export Company (AGF) to 51 per cent in 2009, in order to take advantage of its lucrative export markets in Europe and the US.
Meanwhile, the operation of AGF achieved more positive results after becoming HVG's subsidiary, with better governance and distribution networks.
Three years later, AGF's profits grew from VND20.5 billion ($0.97 million) to VND62 billion ($2.9 million) and in 2011, it became the third largest exporter with 30,653 tonnes on a turnover of $93.6 million.
With the ambition of accounting for 25–30 per cent of the sector's total exports (around $3 billion) by 2015, HVG has been investing in factories and farming areas throughout seven provinces in the Mekong Delta.
By the end of September last year, HVG had eight subsidiaries, five joint ventures and long-term investment in three other seafood processors.
Its total assets by that time had reached over VND6.8 trillion ($323.8 million) and private equity VND2.34 trillion ($111.4 million). Charter capital also increased by 13 per cent to VND792 billion ($37.7 million)
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