SK Group to buy 16.26% stake in VinCommerce for $410m

Tuesday, Apr 06, 2021 11:26

At a Vinmart supermarket run by VinCommerce. SK Group will pay $410 million to acquire a 16.26 per cent stake in the company. — Photo courtesy of the company

SK Group on April 6 announced the signing of an agreement with Masan Group Corporation (HOSE: MSN) to acquire a 16.26 per cent stake in VinCommerce, one of Masan’s subsidiaries, for a cash consideration of US$410 million.

The transaction values VinCommerce at $2.5 billion.

Masan and SK agree on Viet Nam’s modern trade grocery retail explosive growth trajectory.

The country’s modern trade grocery retail market is expected to increase its share from 8 per cent of total retail to 50 per cent, making Viet Nam the fastest growing MT market in the Asia Pacific over the next decade.

SK’s investment validates Masan’s turnaround execution capabilities: store network and assortment optimisation, continuous profitability improvement through disciplined commercial margin enhancement, and operating cost-saving rationalisation.

As a result, VCM achieved earnings before interest, taxes, depreciation, and amortisation (EBITDA) breakeven in the fourth quarter last year and delivered positive EBITDA this year. The management expects to achieve positive EBIT in the second half of 2021.

Woncheol Park, representative director of SK South East Asia Investment, the SK Group subsidiary that is making the investment, said: “We have strong belief in the potential of Viet Nam’s online/offline retail sector and expect VinCommerce to play a vital role in its modernisation.

“We are extremely proud of the work Masan Group has done to turn around VinCommerce in such a short period of time and we believe VinCommerce will become the national champion of O2O (Offline to Online) retail in the near future.

“Our investment in VinCommerce is part of SK’s broader strategy of investing in Viet nam’s fast-growing sectors. This is another landmark transaction for SK and reaffirmation of our commitment to Masan Group and Viet Nam.”

For 2021 VCM has laid out a clear plan to strengthen its platform to deliver high-growth and sustainable profits: commercial margin improvement of 2 per cent via direct fresh sourcing and strategic supplier contracts, nation-wide rollout of pilot store models by Q2, and enhanced supply chain model empowered by auto-replenishment engines at MSN’s recent annual shareholder meeting.

Truong Cong Thang, CEO of VinCommerce, said “We are excited that our partner, SK, has validated our turnaround initiatives. The hard work we have done over the last 12 months gives us the foundation to scale up nation-wide to provide 30-50 million consumers with their daily essential needs.

“As we continue to drive VCM’s promise of ‘The Very Best of Fresh,’ I believe we will become consumers’ grocery partner of choice.”

Masan is planning to use the proceeds from this transaction to strengthen its balance sheet and fund future growth initiatives.

Credit Suisse (Singapore) Limited acted as its exclusive financial advisor. — VNS

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