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Vinamilk to acquire second US dairy company

Released at: 11:10, 13/09/2016

Vinamilk to acquire second US dairy company

Photo: Duc Anh

M&A with US dairy concern still under negotiation.

by Hong Nhung

The Vietnam Dairy Products JSC (Vinamilk) is seeking to acquire another dairy company in the US in a merger and acquisition (M&A) deal.

A representative from Vinamilk’s Public Relations Department confirmed with VET on September 12 that “we are still in the negotiation stage and have not yet wrapped up the deal,” while preferring not to reveal any additional details on the terms. “Through M&A deals the company seeks to expand its operations globally and drive up revenue,” she said.

Ms. Mai Kieu Lien, CEO of Vinamilk, told Bloomberg in a recent interview that she expected the deal to be completed by early next year but declined to name the target company or the deal’s value.

According to Ms. Lien, Vinamilk may increase its financial resources for M&A activities as it strives to achieve an annual revenue target of $3 billion in 2017.

“The US is the most difficult market,” she said. “If we are accepted there it would be a major advantage for us, helping us to penetrate into other markets and boost our growth in the fastest way possible,” she said.

She explained that Vinamilk is seeking acquisitions overseas as Vietnam’s dairy market remains underdeveloped compared with neighboring countries. The market hasn’t expanded as rapidly as Vinamilk anticipated when it set the revenue goal a few years ago.

Dairy consumption per capita was 19 liters per year in 2015 compared with 51 liters in Malaysia and 34 liters in Thailand, according to Sai Gon Securities JSC.

The company is also looking for opportunities outside the US to achieve the target. It set aside about $180 million for M&A activities last year but has not spent any of it and may increase the amount in the future if needed. “The goal of $3 billion in annual revenue will be very difficult to meet if we don’t boost M&A activities,” Ms. Lien said.

She forecast that average annual growth in Vietnam’s dairy industry will remain at about 7 to 9 per cent over the next five years and Vinamilk is aiming for growth of at least 10 per cent a year.

In addition to the US and Vietnam, Vinamilk currently has interests in New Zealand and Cambodia. It will build a new milk powder factory in Vietnam next year and plans to expand production at its New Zealand plant, which is operating at full capacity.

Over the next five years Vinamilk aims to increase its domestic milk powder market share to about 50 per cent from 40 per cent and in fresh milk to about 60 per cent from 53 per cent. It expects to keep its market share in condensed milk at about 80 per cent.

Vietnam’s largest dairy company completed a deal to take over the US’s Driftwood Dairy Holding Corporation a few months ago after buying the remaining 30 per cent stake for $3 million, more than two years after it bought 70 per cent for $7 million.

Last year it also raised its stake in New Zealand dairy firm Miraka Limited from 19.3 per cent to 22.8 per cent.

The most recognizable brand in Vietnam with a brand value of $1.13 billion, Vinamilk is now one of the country’s biggest magnets for foreign investors, after removing the 49 per cent cap on foreign ownership. 

Vinamilk’s products are found in 43 countries around the world, including major markets such as the US, Japan, Canada, and Australia.

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