12 December, 2014

Kinh Do Corporation (KDC) has signed an agreement to sell 80% of its stake in Kinh Do Binh Duong (BKD) to a world leading US-based snack manufacturer - Mondelez International for $370 million (VND7,846 billion).

BKD has a current chartered capital of VND 1,144 billion, equivalent to 114.4 million shares. According to evaluation of Investment in Securities, Mondelez has to paid 85,730 dong per BKD’s share in this deal. Thus, BKD will earn a surplus up to VND6,930.8 billion. KDC will be accounted for a substantial profit from this transfer.

Mr. Tran Kim Thanh, Chairman of KDC, said: "The cooperation with Mondelez will help bring Kinh Do confectionery brand to go further. Moreover, KDC’s the next-10-year orientated strategy is to develop multidisciplinary industries and multi-products. KDC will participate in large-scale industries and essential goods, so the transfer of 80% of snack business for Mondelez will help KDC to prepare full resources to pursuade our strategy." 

KDC earlier said it would look to expand into the fields of instant noodles, coffee and cooking oil, but so far consumers have not seen these products with Kinh Do brand on the market. KDC partnered with Saigon Co. Vewong on noodles, with PhinDeli on coffee, and for cooking oil, KDC bought into shares and became a strategic partner of the Vietnam Vegetable Oils Industry Corporation (Vocarimex). 

At the meeting to announce the transaction, the parties preresentatives said they had closely worked with each other for years before coming to a final decision. Although KDC tried to keep this transaction confidential, the market has been waving rumours about KDC’s plan to sell its confectionery business. 

At KDC's annual shareholder meeting in late June 2014, in responding to the question by shareholders of whether Kinh Do would sell its confectionery segment to partner companies, Tran Quoc Viet, Deputy General Director of KDC, then persistently insisted that: "Currently we have no plans regarding what shareholders have asked. KDC is now in the process of restructuring our confectionery business and is looking for a new development space and confectionery remains a bread-maker for KDC ". 

KDC now holds nearly all of BKD’s shares, equivalent to more than 99.8%. BKD owns strong brands such as COSY, SOLITE and AFC, Kinh Do buns, Cracker and Kinh Do moon cakes., etcwhich made KDC to be listed in the "trillion club" in terms of annual revenue.

Tim Cofer, Senior Vice President and Chairman for Asia-Pacific, Eastern Europe, Middle East and Africa of Monelez International, said: "KDC has 4 attractions for us. Firstly, KDC owns strong leadership brands which has become a symbol of Vietnam. Secondly, KDC has two plants both in the South and in the North. Thirdly, KDC has grown in many different market segments, both rural and urban areas. And lastly, KDC has an energetic and experienced administration apparatus which has a similar vision to Mondelez ". 

The parties have yet to disclose any detailed plans after the deal on how KDC’s production and distribution of confectionery products will be. Mondelez has 2 products currently sold in Vietnam namely Orea cookies and Ritz crackers. 

KDC is expected to convene an extraordinary shareholders meeting in early December to submit for approval on this transaction. Regarding the question: in case shareholders do not approve, how would this deal end up? Mr. Thanh said: "We are always looking for opportunities to bring greatest benefit for shareholders. The Board of Directors decided to make this deal for the benefit of shareholders, we believe shareholders will approve." 

This acquisition is expected to be completed in the second quarter of 2015. Mr. Cofer said, a year after the deal is completed, the parties will further discuss Mondelez’s purchase of BKD’s remaining 20% shares. "However, it is still too early to mention about it". 

The Board of Directors of Kinh Do has also announced its decision to fund more investment in Vocarimex, bolstering the KDC’s ownership in Vocarimex to 51% by additionaly buying into shares on the market. Before Vocarimex made its IPO, Kinh Do has already been a strategic shareholder with 24% of shares.

By Duc Luan