COMMENT: KKR places bets on Vietnam with Masan investment
KKR had doubled its investment in Masan Consumer Corp
While multinationals and private equity firms scramble to grab a slice of the dynamic emerging markets of China and India, buyout firm KKR appears to have its eye firmly on the smaller Southeast Asian country of Vietnam. What does it know?
The US buyout firm this morning (9 January) announced it had doubled its investment in Masan Consumer Corp, taking a bigger stake in the Vietnam noodle and fish sauce firm. The deal, which marks the largest single private equity investment in the Southeast Asian country, will see KKR invest an additional US$200m in Masan.
The investment may have been an inevitable one given it already owns a 10% stake in the firm. However, some may question why KKR didn't look to invest, instead, in the rapidly growing economies of India and China.
It seems that intense competition in these developing markets has pushed some buyout firms into smaller frontier markets in pursuit of assets that will give them the growth they desire.
This may indeed be the case with KKR. But rather than see it as an alternative or secondary investment route, the US firm clearly has big plans for the country. And, it might be on to something.
Despite Vietnam's recent economic turbulence, recent years have been kind to the country and it has a population of 80m plus. The Foreign & Commonwealth Office's director for Asia Pacific, Peter Wilson, told a UK industry conference last month that Vietnam is a key country for investment and export.
Indeed, the country's Goverment is ambitious to maintain the rate of investmentgiven the constrained economic climate.
In a sign that Vietnam is determination to woo back foreign investors, according to the Financial Times, the country's State Securities Commission is considering raising the foreign-ownership limits on some companies. A pilot scheme to enable foreign investors to own more than 49% of some companies is expected to be launched by the regulator.
But it may not just be the country's investment prospects that are enticing KRR. Masan is one of the fastest growing FMCG companies in the Asia-Pacific region and one of the largest publicly-listed private sector groups in Vietnam, its CEO Madhur Maini is quick to point out. In the past three years, its revenues have grown from $190m to over $500m in 2012.
Masan's Chin-Su, Nam Ngu, Tam Thai Tu and Omachi sauces are four of the top 50 F&B brands in Vietnam. The company holds the number one position in fish sauce, soya sauce and chili sauce in the country.
Little wonder it looks attractive.
For Masan, KKR's increased investment in the firm will be "instrumental" in making its platform "more scalable", it says, adding that it will allow Masan to further build the group as a "platform to capture Vietnam's structural consumption growth".
For KKR, the deal demonstrates its conviction in Vietnam's structural consumption growth story and will allow it to realise what it says are "opportunities" in the country.
More generally, the company is no stranger to southeast Asia. The firm set up its first office in Asia in 2005 and now employs around 100 staff in the region. It opened its seventh Asian office in Singapore in October as its headquarters for Southeast Asia.
The Masan deal may pave the way for KKR to diversify into other FMCG categories. For Masan, the investment is a significant one and may open up opportunities to expand beyond Vietnam if it so desires.
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