In selling its entire stake in the brewery, the Thua Thien – Hue government received VND1.875 trillion, or US$90 million, from the Danish company.

The sum includes around VND700 billion for “tangible value,” which consists of the company’s two breweries, and more than VND1.1 trillion for “intangible value,” which is the nationally-known brand name Huda beer.

Hue Brewery Co was founded in 1990, four years before the provincial people’s committee placed it in a joint venture with Carlsberg, with each party holding a 50 percent stake worth around $9 million.

The brewery has now become a 100 percent foreign-invested company under Carlsberg’s possession.

Nguyen Mau Chi, the brewery’s CEO, said the stake transfer was a profitable deal, since the provincial government could pocket $90 million from the initial investment of only $9 million.

However, experts said that VND1.1 trillion ($52.8 million) is an extremely low price for the well-known Huda brand name, given its large market share in the brewery sector.

Industry insiders claim that Huda beer holds a 98 percent market share in Thua Thien – Hue, and it is also the leading brand name in the north-central region.

It holds a 95 percent market share in Quang Tri, while the respective figures for Quang Binh, and Ha Tinh are 65 percent and 55 percent.

Hue Brewery also has the highest return on equity among its peers in Vietnam, with profits topping VND409 billion last year.

Even a huge investment of hundreds of millions of dollars rarely yields such a successful business result, economic experts said, adding to the belief that, despite the small initial investment, the stake transfer was conducted at far too low of a price.

The right move at the right time

For their part, Hue Brewery executives and the provincial authorities said the deal was the right move made at the right time.

Chi, the CEO, said the company has aimed to increase its market share to 15 percent from the current 8 percent by 2015.

To achieve this goal, the brewery needs an additional investment of some VND2.5 trillion, VND1.25 trillion of which needs to be earmarked by Thua Thien – Hue, an amount which is beyond the province’s financial ability.

“So we decided to sell out all of our stakes,” Chi said.

“We have to grab this golden opportunity, since few investors will be willing to open their pockets in these hard economic times.”

Chi said the deal was a logical move, since the province now has an additional fund of $90 million to invest in other sectors.

“The deal will help Hue Brewery continue its sustainable development while stimulating other provincial economic sectors, since it is the province’s leading company.”

The company has been the area’s top tax payer for the last 15 years, accounting for 35-50 percent of the total provincial tax collection. It is expected to pay taxes worth VND900 billion this year.

Hue Brewery is also one of the country’s four largest breweries, along with Sabeco, Habeco and Vietnam Brewery.

Nguyen Van Cao, chairman of the provincial People’s Committee, told Tuoi Tre that the stake transfer to Carlsberg was aimed at strengthening the Huda Hue brand name while boosting the company’s development, which will help increase its contribution to the provincial budget.

“The Carlsberg Group promises to spur the investment needed to hike total production from 200 million liters a year to 350 million liters a year within the next five years,” Cao said.

Tuoi Tre - November 30, 2011