BANGKOK -- A Thai Beverage affiliate won the right to buy around 54% stake in Vietnam's Saigon Beer Alcohol Beverage Corp. in what is to be the Vietnam government's biggest divestment of a state-owned enterprise.
The ThaiBev unit, Vietnam Beverage, won the right at an auction held on Monday afternoon in Ho Chi Minh City.
The Vietnamese government expects to collect about $4.8 billion from the deal.
Vietnam Beverage was the only institutional bidder for the company better known as Sabeco. An individual investor who introduced himself as a fortune teller and spiritual dancer also participated in the auction, acquiring a negligible stake.
Vietnam Beverage is wholly owned by F&B Alliance Vietnam, a local unit of the Fraser and Neave (F&N), a food and beverage conglomerate based in Singapore. The Thai Beverage group last month bought a 49% stake in F&B Alliance Vietnam, apparently with the sole intent of bidding for Sabeco.
Anheuser-Busch InBev of Belgium, Japan's Kirin Holdings and other big multinationals showed interest in Sabeco, Vietnam's largest brewer, but withdrew, apparently due to the high purchase price.
ThaiBev, the maker of Chang beer, has long sought a major overseas acquisition to reinforce its core spirits and brewing businesses.
An aging population and increasing excise taxes have put a ceiling on Thailand's alcoholic beverage market. These factors are pushing ThaiBev to become a pan-Southeast Asia provider of beverages.
Thailand has a population of around 68 million, but ThaiBev desperately wants to help itself to more of the rising income of Southeast Asia's 600 million people.
The company has generated most of its overseas sales in Europe. In Scotland, it owns the Old Pulteney whiskey distiller. But CEO Thapana Sirivadhanabhakdi now sees growth potential in Southeast Asia, especially in Cambodia, Vietnam, Myanmar and Laos -- from where many of Thailand's migrant workers hail and where people have similar tastes to Thais.
Vietnam, in particular, is attractive to ThaiBev, Thapana told the Nikkei Asian Review in previous interviews. "Vietnam will be our priority because the market is well-established," he said. "[It is] a sizeable market with over 90 million people, and in terms of infrastructure, it's quite solid."
Vietnam has the largest beer market among the 10 members of the Association of Southeast Asian Nations, with annual production of more than 4 million kiloliters, according to a Kirin Holdings research.
When word began to circulate around 2015 that the Vietnamese government was mulling a sale of Sabeco shares, ThaiBev showed an interest in acquiring them.
ThaiBev has recently become more active in Vietnam. In 2015, it began selling Chang in the country. A year later, it set up a company there to sell distilled spirits. In addition, Thai conglomerate TCC Group, which owns ThaiBev, operates a bottling plant and trading house in Vietnam. In 2016, TCC acquired Metro, a chain of discount stores in Vietnam.
In 2016, when the government offered to sell shares in Vietnam Dairy Products, Fraser and Neave, a Singapore-based beverage unit of TCC that is 28% owned by ThaiBev, purchased an additional 5.4% stake in Vietnam's largest dairy company, known as Vinamilk. That raised its stake to nearly 20%.
ThaiBev currently makes 30% of its sales overseas but wants to raise the figure to 50% by 2020. This partly explains its interest in acquiring companies elsewhere in Southeast Asia. In October, it acquired two distilled alcoholic beverage makers in Myanmar for a total of $742 million.
The Sabeco deal will be ThaiBev's first acquisition of a major foreign beer brand since it bought Fraser & Neave, which had a 55% stake in Myanmar Brewery. TCC's Singapore unit sold the stake to Japan's Kirin Holdings following a dispute with regulators.
Thai Beverage's cash and cash equivalents were 9.9 billion baht ($297 million) as of Sep. 30. Soh Lin Sin, an analyst at Phillip Securities, estimates new loans of around 36 billion baht will be required to fund the company's recent shopping spree, including the Myanmar distilleries purchase.
Although the borrowing could impact ThaiBev's financials in the short term, analysts are generally positive that the deal is strategically sound, given the opportunities it will bring the company.
"It is not a cheap deal," an analyst with a Singapore securities house said. "But the potentials of Vietnam's growing beer market and the leading position that Sabeco controls makes the deal fit in very well with Thai Beverage's strategy to grow abroad."
Andy Sim, senior vice president of equity research at Singapore's DBS Bank, sees Sabeco as one of the few opportunities left in an industry that has been in consolidation mode. "Looking around," he said, "there are not many brewery assets available in the world which control market share [as large as Sabeco]."
Added another analysts: "Other potential bidders already had breweries outside their home markets, but Thai Beverage had nothing much. So it was an opportunity they had to jump to despite the hefty price."
Thai Beverage's shares, listed in Singapore, closed at S$0.97 on Monday, up 1.57% from Friday's close.
Nikkei staff writer Atsushi Tomiyama in Hanoi contributed to this story.