Warburg-Backed Vincom Retail Plans $600 Million IPO

  • Company targets country’s biggest-ever IPO from private sector
  • Biggest Vietnam developer aims to list mall unit this year

Vincom Retail, the Vietnamese mall operator backed by Warburg Pincus, is planning a domestic initial public offering that could become the country’s biggest-ever share sale from the private sector, people with knowledge of the matter said.

The unit of Vingroup JSC, Vietnam’s largest developer, has selected investment banks to work on the offering and aims to sell shares as soon as this year, according to the people. It aims to raise about $600 million, which may include a sale of existing shares as well as new stock, the people said, asking not to be identified because the information is private.

Vincom Retail is preparing to raise funds as economic growth in Vietnam raises living standards and increases shoppers’ disposable incomes. The benchmark Ho Chi Minh Stock Index this month hit its highest level since 2008, while the Asian Development Bank forecasts the nation’s economy will expand 6.3 percent this year.

A $600 million offering would also be the country’s largest IPO in a decade, trailing only the 2007 share sale from Bank for Foreign Trade of Vietnam JSC when it was chosen for a government pilot program for privatization in the banking sector. The last first-time share sale that topped $100 million came from local airline VietJet Aviation JSC, whose shares are up 48 percent since they started trading in February.

Modern Retail

The exact size of the Vincom Retail offering hasn’t been set yet, and the timetable for the listing could slip, the people said. Representatives for Vingroup and Warburg Pincus declined to comment.

Middle-class and affluent consumers in the biggest Southeast Asia economies favor imported goods and international brands, which has driven retail growth in places like Kuala Lumpur, Manila and Bangkok, according to a September report by the Hong Kong Trade Development Council. Vietnam has the most optimistic retail outlook, and there’s plenty of room for further growth given modern retail is still at an initial development stage, the report shows. 

Shares of Philippine mall operator SM Prime Holdings Inc. have risen 15 percent over the past year, bucking the 1.3 percent decline in the benchmark Philippine Stock Exchange PSEi Index. It trades at 35.5 times forecast 2017 earnings, according to data compiled by Bloomberg. Central Pattana Pcl, Thailand’s largest developer of retail property, has gained 23 percent in the past 12 months and now trades at 31 times estimated earnings.

Mega Mall

Warburg Pincus led a consortium that bought a 20 percent stake in Vincom Retail in 2013, in the U.S. private equity firm’s first deal in Vietnam. It completed another $100 million investment two years later. Vincom Retail owns shopping centers including Vincom Mega Mall Royal City and Vincom Mega Mall Times City.

Since Warburg Pincus’s initial investment, Vincom Retail has expanded its portfolio from fewer than 5 properties to around 40 malls totaling 1.1 million square meters, according to the people. It has more than 60 percent market share in the country’s modern retail industry, the people said.

The private equity firm said in 2015 it will commit $125 million toward a venture with PT Nirvana Development that will develop hypermarket-anchored shopping malls in second- and third-tier Indonesian cities. In China, Warburg Pincus has invested in department store chain Intime Retail Group Co. and Red Star Macalline Group Corp., which runs home furnishing centers across the country.

— With assistance by Vinicy Chan

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