HANOI -- Two leading Vietnamese conglomerates Vingroup and Masan Group have agreed to merge their retail and consumer goods manufacturing businesses, they said on Dec. 3, in a move to create the country's largest retail company.
Masan will take control of the merged company while Vingroup will remain as a shareholder. Vingroup, the largest conglomerate in the country, intends to focus on technology and manufacturing.
The two groups agreed to merge those businesses through a share swap. Both declined to give any details of the deal other than to say that they were undergoing a legal process to merge.
The merged company will own a network of more than 2,600 outlets across the country including 115 Vinmart supermarkets and more than 2,400 Vinmart+ convenience stores now operated by Vingroup.
Masan is the Vietnamese market leader in consumer goods such as soy sauce, fish sauce and instant noodles, accounting for more than 40% of the local market. It posted a net revenue of 12.3 trillion dong ($534 million) and profit after tax of 2.5 trillion dong in the January to September period.
South Korean SK Group is an investor in both companies. SK invested $1 billion in Vingroup in May. This came after it invested $470 million in Masan in September 2018.
For Vingroup, the merger is in line with the group's ambition to become one of the country's foremost tech manufacturers. The company recently began TV production which follows last year's launch of a smartphone brand and the rollout of Vietnam's first homegrown car brand in June.
Market observers said the deal will help Vingroup to cut its losses in the retail sector. Vingroup's retail business includes the VinPro electronic chains, which is not included in the deal with Masan. Vingroup posted revenue of 121.8 trillion dong and net profit of 6 trillion dong in December 2018.
"Vingroup decided to change the development strategies in order to focus on the technology industry," said Vice Chairman and CEO Nguyen Viet Quang. He said the group launched its auto and smartphone manufacturing businesses "with global expansion aspirations."
"We have to optimize all resources [under the group] to internationalize the two businesses," he added.
Standard & Poor's in September revised its outlook on Vingroup from "stable" to "negative" due to rising indebtedness as it funds its auto ambitions.
In June, Quang said the group chose not to be rated by Fitch Rating, at a time when it was escalating its investment into new segments, including auto and high tech.