Thanh Thanh Cong Tay Ninh Sugar JSC (TTCS) will make a share swap to fully acquire Bien Hoa Sugar JSC in order to create the biggest sugar producer in Viet Nam.

TTCS will issue nearly 304 million shares to convert all outstanding shares of Bien Hoa Sugar at a ratio of 1:1.02. In other words, each share of Bien Hoa Sugar is equal to 1.02 shares of TTCS.

The conversion ratio was calculated by a third-party company that valued each share of TTCS and Bien Hoa Sugar at VND20,944 (93 US cents) and VND21,356, respectively.

The share swap will help TTCS take total control of Bien Hoa Sugar’s capital. The deal will be carried out within 90 days plus additional time (if needed), starting from the day TTCS receives the permit from the State Securities Commission on share issuance.

The merger will increase the chartered capital of TTCS by more than VND3 trillion ($133.3 million) to VND5.57 trillion.

After the merger is completed, Bien Hoa Sugar will be renamed to Thanh Thanh Cong Bien Hoa-Dong Nai Sugar Co Ltd to marks TTCS’s sole ownership of the company.

TTCS expects its combined revenue will reach VND8.35 trillion after the merger, and its combined pre-tax profit will tap VND674 billion.

The merger is also expected to help TTCS accrue a 30 per cent market share in Viet Nam. The new company will have total assets of VND14.67 trillion and total payable assets of VND7.86 trillion.

TTCS shares, listed as SBT on the HCM Stock Exchange, are trading near the all-time high of VND29,000. SBT closed Thursday at VND28,450.

Shares of Bien Hoa Sugar are listed on the same bourse as BHS and also move around the all-time high of VND20,000. BHS ended Thursday at VND20,050.

TTCS chairman Pham Hong Duong said at the company’s extraordinary shareholder meeting held on Thursday that the M&A between the two firms will help TTCS heighten its position in the sugar market and improve its quality of financial management, corporate governance and business operations.

The merger will combine good qualities of two sides, which include a strong retail network and good reputation for Bien Hoa Sugar and good production for TTCS, Duong said. He also said that the post-merger company will be able to create more added values and reduce its total cost.

According to a report presented by Bao Viet Securities (BVSC) at the meeting, the post-merger company will have 40,000ha of total planting area, equal to 16 per cent of total sugarcane area across the country.

The brokerage also said that the post-merger company will have an average annual growth rate of 6.6 per cent, while doubled capital will help the new firm negotiate with suppliers to reduce input costs.

In addition, TTCS will be able to share the retail network of Bien Hoa Sugar to slash its selling cost and increase its profit, resulting in the rise of price of company’s shares and benefiting its shareholders. — VNS