LEARNING ABOUT THE TYPICAL CASE STUDY M&A OF VIETNAM DAIRY INDUSTRY: A BUSINESS BETWEEN VINAMILK AND GTNFOODS

1. A brief overview of the M&A case study between Vinamilk and GTNFoods

The merger and acquisition case study between Vinamilk and GTNFoods is a representative example of the complexity and size of the merger and acquisition process in Vietnam.

In 2019, Vietnam's dairy market is forecasted by many experts to grow at 5-6% per year because this is an industry that has begun to enter the saturation phase. At that time, as the largest company in the dairy industry, Vinamilk quickly realized the difficulty in maintaining the growth momentum as in previous periods.

Moreover, competition in the industry is also becoming increasingly fierce as some foreign enterprises benefit from the results of free trade agreements. In that context, Vinamilk quickly came up with solutions to its development problem. In which, the most prominent is the strategy of Strengthening M&A activities.

On the other hand, Moc Chau Milk (MCM) is a brand with a long and familiar history in the North, especially in rural areas when holding 23% of this market share in 2018. In addition, MCM also owns a herd of cows with a scale of up to 27,500 cows raised on an area of ​​more than 4,000 hectares.

However, the business results of GTNFoods (which owns 51% of MCM) show an underperformance trend. Specifically, the revenue in the period 2017 - 2019 of the enterprise continuously decreased from 3.781 billion to 2,970 billion. Meanwhile, selling and administrative expenses increased to 13.6% and 6.6% respectively. Moreover, both ROE and ROA of GTNFoods in the above period were always at < 1%.

Owning a potential farming area (near China) and having a large market share in the North, but business activities are increasingly inefficient. GTN is exactly the target company that Vinamilk wants to target.

2. The story of the M&A case study between Vinamilk and GTNFoods

After Vinamilk announced a public offer to buy shares of GTN, the leaders of the two sides had many bilateral meetings to discuss the strategic direction of development.

The two sides reached a general agreement before December 7, 2019 when Vinamilk's Board of Directors issued a resolution to increase its ownership rate to 75%. The above consensus was further clarified through the resolution of the shareholder meeting on December 16, 2019 to clarify the issue when Vinamilk was allowed to raise the ownership rate to 75% without having to go through the bidding procedure. public. At the same time, GTN also approved the divestment plan to restructure the company with the approval rate up to 99.98%.

After completing the restructuring on December 31, 2019, GTN will only own 2 subsidiaries (Vietnam Livestock Corporation and Moc Chau Dairy Cow Breeding Joint Stock Company) and 3 associated companies. . In which, Vietnam Livestock Corporation is the parent company of MCM. It can be seen that the core activity after the restructuring of GTN is to focus on dairy production and trading instead of diversified activities like before.

3. The M&A deal with Vinamilk helped GTN make a breakthrough

Like other M&A projects, after Vinamilk participated in the operation and management, GTN has recorded positive development results.

Specifically, in the first quarter of sharing a house with Vinamilk, the gross profit margin of the business that owns the Moc Chau Milk brand has improved significantly to 26.3%. In addition, the company's profit after tax in the first quarter of 2020 also reached VND 40 billion, 2.3 times higher than the same period in 2019.

In addition, Vilico (VLC) also reported a 30% increase in profit in the first quarter of 2020 (Vilico is currently a subsidiary of GTNfoods JSC, so it is also owned by Vinamilk). Profit growth mainly from its subsidiary, Moc Chau Milk, is also thanks to the reorganization of the distribution system, optimizing sales and reducing operating costs of the giant Vinamilk.

Not only that, Vinamilk also focuses on supporting Moc Chau Milk in the development of high-tech dairy farms according to international standards. The enterprise also consumes raw milk products from livestock households in Moc Chau, provides technical support, animal husbandry, and veterinary care for local people, etc. Since then, Vinamilk contributes to creating jobs, increasing incomes, and developing jobs. develop the economic and social life of Moc Chau district and neighboring areas.

Conclusion

The M&A case study between Vinamilk and GTNFoods that INMERGERS has put together is summarized above. The article's goal is to provide readers with relevant information about company mergers and acquisitions.

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