Summary: Overview of the ThaiBev-Sabeco M&A Deal
At the end of 2017, ThaiBev indirectly acquired 53.59% of Sabeco’s shares for USD 4.8 billion through its subsidiary, Vietnam Beverage, marking one of the largest M&A transactions in the region. This deal occurred amidst Vietnam’s push for equitization and the imposition of foreign ownership limits, raising questions about how ThaiBev successfully executed the transaction. The deal not only showcased the attractiveness of Vietnamese enterprises but also provided valuable legal insights for the successful execution of M&A transactions.
1. Context
During the 2010s, the Vietnamese government promoted the equitization of state-owned enterprises, formalized under Decree No. 59/2011/ND-CP and Decree No. 189/2013/ND-CP. On 18 December 2017, as part of this process, the Ministry of Industry and Trade auctioned 343.3 million shares (equivalent to 53.59% of charter capital) of Saigon Beer-Alcohol-Beverage Corporation (Sabeco).
At that time, Sabeco was a market leader in the Northern beer industry with an extensive distribution network, growing market share, and increasing profitability. Thai Beverage Public Company Limited (ThaiBev), founded in 2003 by billionaire Charoen Sirivadhanabhakdi, is a leading Thai conglomerate in the alcohol and real estate sectors, headquartered in Bangkok and listed on the Singapore Stock Exchange.
Vietnam was considered a highly attractive market with one of the highest beer consumption rates in Asia—3.8 billion liters in 2015, or 41 liters per capita—and a favorable transportation infrastructure for building a national distribution network.
ThaiBev’s acquisition of Sabeco was seen as a strategic move, allowing it to gradually dominate the regional market through its Vietnamese entity. Valued at USD 4.8 billion, the transaction was one of the most prominent and substantial M&A deals in both Vietnam and Southeast Asia.
The image is designed by DNP Viet Nam Law Firm.
2. Legal Challenges:
Vietnamese law differentiates between domestic and foreign investors. Under Clause 1, Article 1 of Decree No. 60/2015/ND-CP, a foreign investor includes: (i) individuals of foreign nationality; or (ii) organizations established under foreign laws conducting investment and business in Vietnam. Accordingly, ThaiBev qualifies as a foreign investor.
Vietnamese law permits foreign investors to acquire shares in equitized state-owned enterprises through public offerings; however, it also imposes foreign ownership limits on them (Clause 2, Article 1 of Decree No. 60/2015/ND-CP).
Foreign ownership ratio is defined as “the aggregate of shareholding and voting capital contribution held by all foreign investors and economic organizations in which foreign investors hold 51% or more of charter capital” in public companies, securities trading organizations, or securities investment funds (Clause 1, Article 1 of Decree No. 60/2015/ND-CP).
Specific foreign ownership limits are as follows:
(i) Where international treaties to which Vietnam is a party provide otherwise: the treaty prevails;
(ii) Where investment or related laws specify ownership caps: the limits in those laws apply. For public companies operating in conditional business sectors applicable to foreign investors without specific limits, the cap is 49%;
(iii) For companies operating in multiple sectors with differing foreign ownership limits: the lowest limit applies;
(iv) In all other cases: no restriction applies.
In Sabeco’s case, its business lines included conditional sectors such as alcohol production and travel services (under Appendix IV of the 2014 Law on Investment and its 2016 Charter). Thus, a direct acquisition by ThaiBev would have been subject to a 49% foreign ownership cap.
This raises a key question: how did ThaiBev manage to acquire a controlling 53.59% stake?
3. ThaiBev’s Transaction Structure
In practice, ThaiBev utilized a complex legal structure involving subsidiaries established in Hong Kong and Vietnam to indirectly acquire Sabeco. The structure is illustrated as follows:
3.1. Through BeerCo’s Ownership of Vietnam F&B and VietBev
ThaiBev holds 100% of Int’ Beverage Holdings. In turn, Int’ Beverage Holdings owns 100% of BeerCo, and both companies operate as offshore entities. BeerCo owns 49% of Vietnam F&B. Under Clause 7, Article 3 of the 2014 Law on Investment, Vietnamese authorities consider Vietnam F&B a foreign-invested economic organization.
BeerCo’s 49% stake, instead of a controlling majority, appears to be a strategic decision. Under Point a, Clause 1, Article 23 of the 2014 Law on Investment, an organization in which foreign investors hold 51% or more of the charter capital must comply with foreign investor conditions and procedures when acquiring shares in Vietnamese enterprises. Therefore, the 49% ownership serves to avoid triggering such conditions.
Similarly, Vietnam F&B owns 100% of VietBev. Under Point c, Clause 1, Article 23 of the 2014 Law on Investment, VietBev would be subject to the same foreign investor rules if it were owned by an organization meeting the conditions of Point a. Thus, maintaining 49% ownership avoids restrictions on both entities.
3.2. VietBev’s Acquisition of 53.59% of Sabeco
While a 49% stake might have allowed Vietnam F&B to make the acquisition, ThaiBev inserted an additional layer – VietBev. Why was this additional entity necessary? This can be explained from two perspectives:
(i) Ensuring VietBev’s Status as a “Domestic” Entity
Under the Law on Investment,Authorities treat VietBev as a domestic investor (since Vietnam F&B, with 49% foreign ownership, does not qualify as a foreign investor). Consequently, VietBev could acquire Sabeco’s shares without being subject to foreign ownership restrictions..
(ii) Mitigating Future Legal Risks Regarding BeerCo’s 49% Ownership in Vietnam F&B
Risks from Legislative Changes: At the time of the transaction, BeerCo’s 49% stake complied with Vietnamese law. However, future amendments – such as redefining “foreign-invested economic organizations” or altering control thresholds – could affect the entities’ status. The additional corporate layer enhanced legal stability ensured long-term legal stability.
Risks from Control Assessments: With only 49% of Vietnam F&B’s shares, BeerCo could not legally ensure control and had to rely on shareholder agreements and binding commitments. Future regulatory scrutiny could challenge this structure.
Ultimately, VietBev successfully acquired 53.59% of Sabeco’s shares without any legal impediments. The use of an additional corporate layer provided legal insulation for the foreign investor in this M&A transaction.
Conclusion
The ThaiBev-Sabeco M&A transaction exemplified sophisticated legal structuring was a remarkable legal feat. ThaiBev effectively navigated Vietnam’s regulatory framework and mitigated potential risks, establishing a precedent for executing complex M&A transactions and a solid legal foundation for executing its long-term strategic objectives.
The information above is for reference only. If you require further details, please contact us using the information below.
========================================
DNP VIET NAM LAW FIRM
Contact:
🏢 Address: 5th Floor, 52 Nguyen Thi Nhung Street, Van Phuc estate, Hiep Binh Phuoc, Thu Duc City, Ho Chi Minh City, Viet Nam.
📩 Email: info@dnp-law.com.
📞 Hotline: 0987 290 273 (Đinh Văn Tuấn Lawyer).
Website: https://www.dnp-law.com/
