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Korean conglomerate investing in Vietnamese logistics

Updated at Monday, 09 Oct 2017, 19:27
The Hanoitimes - With the advantage of participating in free trade agreements, Vietnam is becoming an attractive destination for foreign investors, especially world leading corporations such as Samsung, Microsoft, LG with plans to move their factories to the country. This has played a big part in expanding Vietnam’s export, and also increases demands for transportation.
Vietnam currently has 1,300 logistics enterprises, including Foreign Direct Investment (FDI) enterprises. The logistics market in Vietnam is estimated at 20 – 22 billion USD per year, contributing 20.9% of the GDP. One of the most important phases of logistics is transportation, which contributes 40 – 60% of the expenses. 


South Korea's CJ Group, a South Korean conglomerate holding company headquartered in Seoul, which operates in various industries of food is planning to acquire logistics companies in Southeast Asia, with an aim to become one of the leading logistics company in the world. 

As such, it has acquired over 50% of the shipping and logistics subsidiaries of Gemadept, Vietnam's biggest logistics company. The deal is thought to be more than $120 million, with the valuation of the two above companies at 250 million USD. CJ Group's aim is to become one of the top five logistics companies globally. Earlier this year, the Investor Newswire quoted the chief executive of CJ Logistics, Park Geun-tae, saying his company was looking for logistics companies in Southeast Asia and was "interested" in Gemadept. CJ Logistics has in recent years acquired China Shenzhen Speedex Commercial Service and Rokin Logistics, Malaysia's Century Logistics, UAE's Ibrakom, and India's Darcl Logistics.

Gemadept is one of the leading logistics company in Vietnam, which has recently attracted the attention from well-known investment funds, such as: J.P. Morgan, Nikko, Composite, Consilium, Seafarer, CIM, Indochina Capital, SSI, MBS, VFM, Sarus Capital, Bao Viet Fund.

With the advantage of participating in free trade agreements, Vietnam is becoming an attractive destination for foreign investors, especially world leading corporations such as Samsung, Microsoft, LG with plans to move their factories to the country. This has played a big part in expanding Vietnam’s export, and also increases demands for transportation.

Chang Bok Sang, president and chief executive of CJ Group Vietnam, said the group has a fund for mergers and acquisitions (M&A), and is looking at Vietnamese state-owned enterprises undergoing privatization. The company has enjoyed annual growth of around 30%, and is keen on diversifying into more sectors in Vietnam. As of 2016, the company had invested $500 million in Vietnam's agricultural, entertainment, pharmaceutical, and retail sectors, and plans to increase its portfolio to $1 billion by year's end. The company entered Vietnam in 1998, starting out with animal feed. It became one of the top four companies in that sector, and will have a sixth animal feed plant in operation this year. 

CJ went on to enter the food sector in 2007 with its Tous Les Jours bakery chain, which by last September had 30 outlets in the country. In 2011, the company caught public attention by spending over $73 million acquiring about 80% of Megastar Cinema, Vietnam's biggest cinema chain at the time. 

In the last few years, it has focused more on food processing and cultivating potential local partners. It failed to become a strategic partner to Vissan, the country's biggest meat processor, after its debut last year. It acquired kimchi distributor Ong Kim, and 47.33% last November in Cau Tre Foods, a popular frozen food brand, which had increased to 71.6% in May. In the first quarter of this year, it invested $13.44 million in a 65% stake in Minh Dat Food, a market leader in meatballs. 

CJ has formed local partnerships to reduce risk. These include one with Saigon Trading Group (Satra), the biggest state-owned company in Ho Chi Minh City, which owns a number of popular food brands and has a national distribution network that CJ uses for product delivery. This year, CJ invested $61.8 million in a food processing complex with a research and development facility at Hiep Phuoc Industrial Park in Ho Chi Minh City. The project is a partnership with a Satra subsidiary, and due to come into operation next July. CJ is also in talks with livestock companies to develop feed-farm-food supply chains.
Nguyen Tung
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