CJ still in the running for Vissan bid

The auction to choose strategic investors for the Vietnam Meat Industries Limited Company (Vissan) will be held on March 24, 2016, where the Vietnamese meat firm will sell a 14% stake (11.3 million shares) to a maximum of three investors. The registered investors for this auction were Vietnam’s International Agriculture Nutrition JSC (Anco), Vietnamese-French cattle feed maker Proconco (both are Masan Group affiliates), and CJ.

CJ is considered a heavyweight contender in this auction, as the conglomerate has operated in Vietnam since 1998 and earns a compound annual growth rate of 26.73% in the 2011-2015 period. In 1999, it established CJ Vina Agri, its Vietnam-based manufacturer and trading brand for cattle, poultry, and seafood, with factories in Long An, Vinh Long, and Hung Yen provinces. The Korean firm also made the highest bid of VND102,000 (US$4.5) per share at Vissan’s initial public offering on March 7, beating all other institutional investors.

However, despite CJ’s aggressiveness to partner up with Vissan, concerns have been voiced over whether the Korean conglomerate really satisfies all of the criteria to become Vissan’s strategic investor. According to Ho Chi Minh City People’s Committee’s Document No.7995/UBND-CNN dated December 21, 2015 regarding Vissan’s equitisation, one of the most important criteria was that the proposed investors must have a debt-equity ratio of less than 1.5 as of September 30, 2015.

On March 17, Proconco sent complaints to the Ho Chi Minh City People’s Committee, saying that CJ’s debt-equity ratio at the end of 2015 was 1.61, higher than the selection criteria for Vissan’s strategic investors. As such, according to Proconco, it would seem CJ would be ineligible to participate in the auction.

However, according to the firm’s third-quarter financial report, as of September 30, 2015, CJ had the debt-equity ratio of 1.15.

Another problem for CJ is its profitability. Based on figures released on its website, CJ had a consolidated turnover of US$8.3 billion and after-tax profits of US$182 million for the first nine months of 2015. The group had profit margins of 0.7%, 1.2%, and 2.2% for 2013, 2014, and the first nine months of 2015 respectively.

In an interview with VIR late last week, CEO of Vissan Van Duc Muoi quickly disputed all of these concerns.

“Our decision is based on officially audited reports. After a strict verification process, we’re sure that CJ’s debt-over-equity ratio is 1.15, which is less than the 1.5 requirement. Thus the Korean firm is completely eligible to join the March 24 auction,” he confirmed.