Truck farm helped local firm swallow Daewoo hotel
Truck farm helped local firm swallow Daewoo hotel
Thanks to the rau muong (a kind of popular vegetable in Vietnam) garden, the Vietnamese electronics manufacturer Hanel has acquired the luxurious 5-star hotel Daewoo Hanoi as commented by analysts.
Vegetable garden makes a fortune
Only in 2012 did the detailed information about the deal come out to the public, but the insiders foresaw the prospect right in 2005 already, when the government office released a document informing the Prime Minister’s instruction on how to deal with the licenses to the Sai Dong A Industrial Zone and the Daewoo – Hanel joint venture.
The total investment capital of the project is $152 million, including the legal capital of $45 million, in which the Vietnamese Hanel contributed 40 percent (18 million dollars) in the use right of the 407 hectare land plot, while Daewoo E&C contributed 60 percent, or 27 million, in cash.
Only after many years could Daewoo disburse $6 million for the capital contribution to the joint venture because of its financial difficulties. At that time, Hanel affirmed that it would buy all the stakes in case Daewoo could not make the capital contribution as promised.
After years of development, Daewoo Hanoi complex’s value has been increasing unceasingly. In 2012, the total value of the whole complex, including the office center, hotel and apartment bloc, was estimated at $431 million.
However, the complex could not bring the big profit to the investors as expected. Opened in 1996, it began making profit after 8 years. However, by the end of 2009, the joint venture had reportedly incurred the accumulative loss of $3.167 million. The 2010 financial report showed that the joint venture owed $53 million to Woori Bank.
Being a well-known hotel, Daewoo Hotel, like many others, also suffered from the economic crisis in 2007. This might be the reason which led to the Daewoo’s statement in July 2010 that it would sell 70 percent of the capital in Daeha joint venture to Lotte, a fellow countryman.
The group, also from South Korea, planned to pay $111 million to possess 100 percent of Daewoo’s stakes in Daeha. However, the affair failed completely in the last minute because of the appearance of Hanel.
After the negotiations, Daewoo agreed on the stake transfer to Hanel at the alleged price of $100 million. However, the insiders have never made their voice about the price.
Hanel, which was no match for Lotte in terms of the financial capability, won the battle for Daewoo Hotel. South Korean newspapers then reported that Hanel received the financial guarantee from PVFC and some other state owned enterprises to implement the deal.
Hanel won Lotte in the deal because of the priority to buy stakes stipulated by the Vietnamese laws, which say that the partners in the joint venture are prioritized to buy stakes from the other partners. In other words, the “rau muong garden” helped Hanel acquire Daewoo, as commented by analysts.
At the time of establishing the joint venture, Hanel did not have cash and it contributed capital to the legal entity with the rau muong garden.
How is Daewoo Hotel now?
Though the profit is not as big as expected, Daewoo Hotel remains one of the most attractive goals for investors. Even when the takeover deal had not wrapped up yet, a lot of investors then sent words intimating that they were willing to buy the hotel.
However, the story has fallen into oblivion after the administrative procedures got completed. It’s unclear because Hanel does not want to sell the hotel, or investors have become no longer interested in the deal.
Meanwhile, Daewoo Hotel has been operating very well and it has always been listed among the best hotels in Hanoi.
vietnamnews
