December 26, 2017 11:45 am JST

Thailand's M&A king lives up to his reputation with $4.8 bn Saigon Beer deal

TCC Group's self-made billionaire Charoen keeps expanding, massive land bank provides financial security

YUKAKO ONO, Nikkei staff writer

Charoen Sirivadhanabhakdi, the chairman of Thai Beverage, and wife Wanna at the relaunch of Pantip Plaza IT Shopping Mall in Bangkok © Getty Images

BANGKOK -- With deep pockets from his extensive beverage and property businesses, Charoen Sirivadhanabhakdi, the self-made billionaire behind Thailand's popular Beer Chang, is widely regarded as Thailand's king of M&A.

He confirmed that reputation when Thai Beverage, the flagship business in his TCC Group, emerged as the sole-bidder for Sabeco, Vietnam's biggest brewery and the producer of Saigon Beer, in a state-run auction earlier this month. The hefty price of $4.8 billion set by the Vietnamese government stopped other global names from even placing bids.

Saigon Beer accounts for more than half of Vietnam's market, and is the latest jewel in the TCC Group crown. The conglomerate has already mopped up beverage maker Oishi Group, the Big C supermarket chain, and Berli Jucker, a 130-year-old trading house. Regionally, TCC fought hard for Fraser and Neave (F&N), a beverage conglomerate in Singapore. 

The Thai group has shown plenty of interest in Vietnam lately with its youthful population of 90 million. TCC acquired the Vietnamese subsidiary of Metro, a German cash-and-carry chain in 2015. Last year, when the government divested holdings in Vietnam Dairy Products (Vinamilk), the leading dairy company in Vietnam, F&N raised its 11% stake to nearly 20%.

 

Charoen generally avoids the media and keeps out of the public eye. In a rare encounter with reporters in 2012 at the opening of a bottling plant in Vietnam, he spoke of providing Vietnamese consumers with value for money. "We must try to provide as many product choices as we can," he said. "And it must be the product that the people of Vietnam truly want, not something pricey." In the interview, he also touched upon Sabeco, expressing interest in building "a stronger partnership."

With a net worth of $19.3 billion, Charoen was ranked No. 2 after Dhanin Chearavanont, executive chairman of agribusiness conglomerate Charoen Pokphand Group, in Thailand's rich list published by Forbes magazine in 2017.

The son of a street vendor who sold hoi thod -- mussel pancakes -- in Bangkok's old Chinatown, it is perhaps not surprising that Charoen became involved with the food and beverage industry. After leaving school young, he sold goods on the streets and later became a supplier to distilleries.

 

When the government liberalized the liquor industry in the late 1970s to early 1980s, Charoen obtained licenses and produced Sangsom rum. He later merged with a distillery producing Mekhong, a competing government-owned brand. Both brands remain popular, and go well with Thai food. 

The 73-year-old Charoen has steadily expanded his business through M&A and partnerships. In 1995, Beer Chang was launched through a joint venture with Denmark's Carlsberg. At the time, the market was dominated by Boonrawd Brewery, which produced Singha beer.

Chang hit a lower price point, and by 1998 had assumed the market lead with a 54% share. Although the joint venture with Carlsberg ended in 2003 resulting in a bitter legal dispute, Chang still outsells Singha, but has been overtaken by Leo, a cheaper beer from Boonrawd.

Like many Thai tycoons, Charoen is ethnic Chinese. His forebears are from Shantou, Guangdong province, as are those of Dhanin. Both men were educated in China and speak the language. 

TCC's China connections are less obvious than that of CP Group's with its many investments there. Charoen has strong ties with the Thai establishment, and is a staunch royalist. Charoen's surname was granted by King Bhumibol Adulyadej in 1988. One of the benefits of acquiring Berli Jucker was gaining the company's garuda -- a rare and much coveted royal award to favored businesses ranging from restaurants to conglomerates and banks. Later, in 2013, Thai Beverage was also granted the garuda.

Like many large Thai businesses, TCC Group has vast financial reserves in its land holdings and properties that are controlled by unlisted entities. According to the land department in 2014, TCC Group was by far the largest private owner of land in Thailand with some 100,800 hectares -- an area equivalent to two thirds of the total area of Bangkok, the capital. 

The group has diversified into real estate with shopping complexes, hotels, and entertainment districts. Its latest project, One Bangkok, is a mixed-use complex that will become the nation's largest ever private development project costing 120 billion baht ($3.6 billion). Covering 167,000 sq. meters, the project sits on land owned by the Crown Property Bureau that was once home to the Armed Forces Preparatory School. It enjoys a prime location at the junction of two or the city's most important thoroughfares, Witthayu (Wireless) Road and Rama IV Road. Indeed, four out of the five major projects along a 4km stretch of Rama IV Road belong to TCC Group. 

Phillip Securities estimates 36 billion baht in loans will be needed to fund Thai Beverage's recent acquisitions, which apart from Sabeco include a pair of distilleries in Myanmar. Few analysts doubt the solidity of Thai Beverage's finances, however. As one noted, the company owns 28% of Frasers Centrepoint in Singapore through a wholly-owned investment company. "If Thai Beverage decides that its debts are too high, it can repay loans by selling the stake to group affiliates," the analyst said.

Many of the group's food and beverage businesses are listed, but none of the companies dealing with real estate and financial operations in Thailand have gone public.

Nevertheless, market players appear to be more concerned about the short-term impact of the huge investment in Sabeco. Thai Beverage shares slipped 6% in the week after the Sabeco deal's announcement. 

Asia300

Thai Beverage Public Co., Ltd.

Thailand

Market(Ticker): SES(Y92)
Sector:
Industry:
Consumer Non-Durables
Beverages: Alcoholic
Market cap(USD): 17,830.15M
Shares: 25,110.02M

Fraser & Neave Ltd.

Singapore

Market(Ticker): SES(F99)
Sector:
Industry:
Producer Manufacturing
Industrial Conglomerates
Market cap(USD): 2,833.50M
Shares: 1,448.25M
Asia300

Vietnam Dairy Products Corp.

Vietnam

Market(Ticker): STC(VNM)
Sector:
Industry:
Consumer Non-Durables
Food: Meat/Fish/Dairy
Market cap(USD): 13,311.37M
Shares: 1,451.27M

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