The Sabeco – ThaiBev transaction announced on Monday is no doubt the biggest equity deal in Vietnam so far. The deal structure (see below) as reported by newspaper involves Vietnam Beverage acquiring 53.59% shares in Sabeco. Vietnam Beverage is wholly owned by Vietnam F&B Alliance Investment. Thai Bev, in turn, indirectly owns 49% of Vietnam F&B Alliance Investment. From the look of it, it appears that ThaiBev is investing in Sabeco by setting up a “non-foreign” investor through various corporate layering.
Under the Investment Law 2014, an economic organization in Vietnam (Vietnam EO) must satisfy certain conditions and comply with the investment procedures applicable to foreign investors when participating in the incorporation of another Vietnam EO or acquiring ownership interest in an existing Vietnam EO if 51% or more of charter capital of the first-mentioned Vietnam EO is held by:
- foreign investors only (in that case, the Vietnam EO is considered as a 51% Top-level FIEs); or
- 51% Top-level FIEs only; or
- foreign investors and 51% Top-level FIEs jointly (Mixed 51% Top-level FIEs).
So by adding multiple corporate layers or by holding below 51% charter capital of a company in Vietnam, a foreign investor may avoid being deemed as a foreign investor but still retain control of such company. It appears that Thai Bev is employing both tactics in setting up Vietnam Beverage. Despite certain legal uncertainties, this is not an unusual deal structure and has been employed in several transactions in Vietnam. The difference in this transaction is that officials from Ministry of Industry and Trade publicly endorse this structure in newspapers.