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Mondelez to buy stake in Vietnamese snack company Kinh Do

 Mondelez has announced plans to buy an 80 per cent stake in Vietnamese snack company Kinh Do for $370m as the global snacks company seeks to expand its presence in the fast-growing Asian market.

 

Tim Cofer, president for Asia-Pacific and eastern Europe, Middle East and Africa, said the acquisition would allow Mondelez to expand its relatively small Vietnamese business by using Kinh Do’s well-established distribution network, particularly in the country’s many kiosks and traditional markets.

 

“This represents a step-change in our distribution depth here in Vietnam,” he said.

 

Mr Cofer said it would also give Mondelez a chance to make inroads with the 60 per cent of Vietnam’s 90m citizens that are under the age of 30. “That demographic profile is obviously very interesting to us and demonstrates the growth [potential],” he said.

 

 

Kinh Do generates roughly $175m in annual revenues, selling biscuits and mooncakes. By comparison, Asia-Pacific accounted for roughly 14 per cent of Mondelez’s $8.3bn in third-quarter sales.

 

Before Mondelez makes any investment, Kinh Do must complete a planned restructuring that will bring its snacks business under one business entity, BKD. Mondelez will then pay $370m for 80 per cent of the shares in BKD.

 

Under the terms of the deal Mondelez has the option to buy – and Kinh Do the option to sell – the remaining 20 per cent stake within 12 months of the deal’s completion. Financing details were not disclosed.

 

Along with Kinh Do’s own-branded products, it also produces Solite soft cakes, AFC crackers and Cosy biscuits. Mondelez said the portfolio would complement its own Oreo cookies, Ritz crackers and Cadbury chocolates.

 

The news comes a week after Mondelez beat third-quarter earnings expectations and lifted its full-year profit forecast after cutting costs and raising prices in the face of weak global demand.

 

Irene Rosenfeld, chief executive, said weak global economic conditions were likely to persist through 2015.

 

“I think it’s fair to say we’re seeing a fairly significant slowdown in the global macro environment,” Ms Rosenfeld said. “One of the best indicators is that GDP in Bric markets has fallen almost in half from the 2010 period to today.”

 

Ms Rosenfeld said the weak environment was “really a global phenomenon” and that the company was “not expecting any dramatic changes as we look out to 2015”.

 

The deal must be approved by Kinh Do’s shareholders and regulators. Mondelez said it expects the transaction to close by the second quarter of 2015.

 

Source: The Financial Times

 

 

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