Warburg to make $200m Vietnam debut

A consortium led by Warburg Pincus is set to make its first investment in Vietnam with the purchase of a 20% stake in a retail real estate company.

Warburg Pincus is to make its first investment in Vietnam leading a $200 million stake purchase in the retail property business of Vietnam’s largest private real estate company, Vingroup Joint Stock Company.

According to a joint statement, New York-based Warburg Pincus is leading a consortium of investors purchasing a 20 percent stake in Vingroup’s retail business, Vincom Retail in a deal expected to close at the end of this quarter. 

Following the sale of the stake, Vincom Retail, which is responsible for seven assets valued at $1.1 billion, will be managed jointly by Warburg Pincus and Vingroup. 

The “vast majority” of this investment is structured as an equity investment, according to Warburg managing director Joseph Gagnon, and comes from the firm’s Fund 11 private equity fund, which closed on $11.2 billion last week. Although the vehicle closed recently, Warburg has been investing from that fund for over a year now.

As part of the deal Warburg will receive board seats on both Vingroup and Vincom Retail. The firm has also promised to commit up to $25 million to the company’s future capital raising efforts, and has the additional option of committing another $100 million to the Vincom Retail platform for expansion, according to the statement.

Warburg’s investment marks Vingroup’s second successful capital raising effort from international investors following a $300 million convertible bond issuance in 2012. The company’s goal is to use the capital to help it add another 20 shopping malls across Vietnam in the next four years to five years, particularly in Tier II cities.

“Our retail business is our most mature [business] by far… but with Warburg Pincus as our partner, we want to take it to the next level,” said Thi Thu Thuy Le, Vingroup’s chief executive. Two malls just four to five kilometers from the city center of Hanoi are scheduled to open before the end of the year, she added.

Warburg was keen to invest in Vingroup because of the way it performed during the last down cycle, Gagnon added. When the global financial crisis started, the company’s retail revenue totaled $10 million; now, after four years of recession, that has multiplied to $200 million, according to Le. “It outperformed the market by multitudes,” Gagnon said.

Although Warburg’s investment will be limited by the life of its private equity fund, Gagnon hopes the partnership will last much longer than the planned four to five years with additional investment opportunities.

“We hope this will not be just a one-time investment – we hope this will be just the first of many,” Le added.