Choose Trung Nguyen or G7: Whether Mrs. Thao’s decision would weaken the company against other rivals?

Receiving G7 brand or Trung Nguyen brand with the existing production and distribution system, both Mr. Vu and Mrs. Thao can continue to do business with their own famous brands in the domestic and foreign markets instead of rebuilding from scratch as what Mrs. Thao is doing with her own brand, King Coffee.                                                

The controversial divorce of two key shareholders of Trung Nguyen Group, Mr. Dang Le Nguyen Vu and Mrs. Le Hoang Diep Thao, may soon come to an end. After many mediations, the assets division will be decided in the trial scheduled to be held on January 30th.

Notable information before the trial was that Mrs. Thao suggested that the total assets of them will now be divided into two groups: Trung Nguyen and G7.

The first option belongs to Mr. Vu, meaning that if Mr. Vu chose Trung Nguyen, Mrs. Thao would receive G7 or vice versa. Moreover, after making his decision, Mr. Vu still has 1 more month to change the decision. Accordingly, Mrs. Thao have to respect and accept Mr. Vu’s final choice.

The separation of Trung Nguyen – if done – could be considered as a good solution to resolve the persistent conflicts between the two parties. It is better than dividing the common stakes of two people with the most important asset – the stakes in the parent company of Trung Nguyen system (Trung Nguyen Investment JSC).

Trung Nguyen Investment has a charter capital of 3,160 billion VND, holds control of Trung Nguyen Group JSC and two other legal entities: Dang Le Tourism Investment Company and Vu Nguyen Dak Nong Company.

According to information from the Digital Library of Intellectual Property (Intellectual Property Department – Ministry of Science and Technology), not only in terms of stakes, Trung Nguyen Investment is also the intellectual property owner of all brands of Trung Nguyen coffee group such as: company brand, coffee shop chains, coffee powder, coffee bean, Trung Nguyen fresh coffee, G7 instant coffee…

By the end of 2017, the ownership structure of Trung Nguyen Investment including Mr. Vu holds 61.66%, Mrs. Thao holds 30% and Ms. Uoc holds 6.68%.

Assuming Mr. Vu and Mrs. Thao’s common property was divided in two, then each person would hold 45.83% of stakes, then Mr. Vu will be more beneficial in terms of ownership when his relatives hold 8.34% of remaining stakes.

Although Mrs. Thao does not hold majority stakes, but with nearly 46% of stakes, Mrs. Thao can still veto many important decisions of Trung Nguyen. But after all, holding a minority stake will not make any changes and there will be no different from the current situation.

Mrs. Thao also suggested that Mr. Vu must support their 4 children with 20% of his stakes but Mr. Vu only accepted support by dividends.

Therefore, the latest suggestion for seperating Trung Nguyen Group into “Trung Nguyen” and “G7” groups can be considered as a well-planned move. The details of the separation are not published but it can be seen that Trung Nguyen brand and G7 brand are the most valuable asset (although they are intangible assets). Both of these brands are owned by Trung Nguyen Investment.

Currently, G7 brand mainly focuses on Trung Nguyen’s instant coffee products. Trung Nguyen brand mainly focuses on coffee roasting products, coffee shops as well as some instant coffee products.

Receiving the brand with the existing production and distribution system, both Mr. Vu and Mrs. Thao can immediately continue to do business with their own famous brands in the domestic and foreign markets instead of rebuilding from scratch as what Mrs. Thao is doing with her own brand, King Coffee.

According to the subjective opinion of the writer, this is the best asset allocation plan and will likely receive consent from Mr. Vu.

But this will lead to an inevitable consequence: weakening Trung Nguyen with its rivals. Trung Nguyen, now along with Vinacafe Bien Hoa of Masan and Nescafe of Nestle, are three big coffee groups in Vietnamese coffee market with the same size. In particular, Trung Nguyen’s business results are even better than the results of Vinacafe Bien Hoa.

When Trung Nguyen Investment was separated into 2 businesses which are smaller than 2 current rivals (Vinacafe Bien Hoa and Nescafe). Trung Nguyen and G7 will become rivals competing directly with each other. However, if this happens, the coffee market will become more active.

 


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