OVERSEAS INVESTMENT:

SEMEN GRESIK BUYS VIETNAM FIRM

Created by: Stella Dea Gracia 120419986 / N Accounting

FAKULTAS EKONOMI UNIVERSITAS ATMAJAYA YOGYAKARTA 2012

Semen Gresik Buys Vietnam Firm

Semen Gresik, Indonesias largest cement producer, is acquiring a cement producer in Vietnam as the company gears up to expand its reach in Southeast Asia. The East Java based Semen Gresik signed a conditional sale-purchase agreement with Hanoi General Export-Import Joint Stock Company (Geleximco) on Wednesday to take over its stake in Thang Long Cement, a cement producer in Vietnam, the company said in a statement on Wednesday. Under the accord, Semen Gresik will have a controlling stake in Thang Long. The acquisition is part of the companys effort to become a regional player in Southeast Asias cement market. Semen Gresik believes that economic growth in Vietnam and other Southeast Asian countries will be supported by increasing construction activities as well as big government [expansion] plans that will create strong growth in the cement industry, it said in a statement on Thursday. The company did not specify the value of the acquisition, but Investor Daily reported that Semen Gresik is setting aside $1.2 billion for investments over the next three years. Under the plan, the company will use $900 million to boost its production capacity and the remaining $300 million to finance acquisitions. Semen Gresik is seeking $500 million through bank loans and bond sales to finance the expansion plans, said Semen Gresik president director Dwi Soetjipto. Thang Long is Semen Gresiks first acquisition outside Indonesia. The Vietnamese company has an annual production capacity of 2.3 million tons in Quang Ninh province, as well as a cement mill on the outskirts of Ho Chi Minh City. By securing a material source and the expansion of a new factory in a strategic location with modern technology, Thang Long Cement immediately offers additional capacity and enough high quality lime stone reserve, Dwi said in the statement. This will strengthen our position in the regional market, enabling us to compete in anticipation of free trade in Asia. Thang Long has permits to develop two new plants in Quang Ninh and Binh Phuoc provinces. The additions are expected to increase Thang Longs production capacity to 6.5 million tons, the statement said. Semen Gresik and Geleximco will jointly establish the two new plants through a subsidiary of Thang Long. We see important benefits from this partnership, where Thang Long can learn from Semen Gresik in its management, operations and investment, Geleximco chairman Vu Van Tien said in the statement. Shares of Semen Gresik rose 1.4 percent to Rp

14,900 on Wednesday.
Additional reporting from Investor Daily

Source: http://www.thejakartaglobe.com/business/semen-gresik-buys-vietnam-firm/556391

UNIT 9 OVERSEAS INVESTMENT

Introduction:
Overseas investment as we know, are direct investment into production in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. A company can be allowed to expand into foreign companies abroad. Overseas investment more specifically have a sense of a long-term investment to company in another country. In this way companies present in the country of origin (usually called home country) could control and take over the company that exist in an investment destination ( called host country) either partially or completely. The trick is with the investors to buy overseas companies existing or provide capital to build a new company there or buy the shares at least 10%. Many situations that encourage companies to invest abroad. Theres many reasons why companies do overseas investment, among others: there are potential prospects and long term / short term (involving factors dependent) companies to invest abroad and motive to achieve a more efficient production and maximum profits, the market approach motive, also the broader market motive. Why Semen Gresik Company buys Vietnam firm? Well, well know this in part discussion.

Discussion:
As has been stated briefly in the previous section, this section will explained more clearly why Semen Gresik buys Vietnam firm and from the article we can called it with overseas investment. Semen Gresik Tbk., as one of the largest cement companies in Indonesia would like to expand their corporate network abroad. The company acquired the company cements Vietnam. The acquisition was included in the conditional sale and purchase agreement (conditional sales purchase agreement / CSPA) between Ha Noi SMGR with General Import Export Joint Stock Company (Geleximco). Through this partnership, making Semen Gresik as the majority shareholder in the companys five largest number of cement Vietnam, Thang Long Cement. Semen Gresik believe that investment in Thang Long Cement is a strategic step to realize the vision of Semen Gresik embody the company as a regional cements company, and became a milestone early expansion abroad. Semen Gresik Tbk. and Geleximco work together to develop new factory in the province of Quang Ninh and Binh Phuoc, Vietnam. They will develop it through its subsidiaries Thang Long Cement. The addition of two new factory to increase production capacity of cement to 6.5 million tonnes of Thang Long Cement Company (TLCC). Geleximco

also gets other benefits from this cooperation. The benefits are: Thang Long Cement can learn skills in the areas of management, operations, and investments owned SMGR in the cement industry.

Opinion & Conclusion:

In my opinion, I agree with the strategy undertaken by the Semen Gresik Company they acquired the Vietnam cement companies and make themselves as majority shareholders number of the fifth largest of cements in Vietnam is the most appropriate action. Semen Gresik would like to develop and enhance their cement capacity production through partnership with Geleximco. The implementation of acquisition of foreign cement companies was made because to developing markets Semen Gresik cement to overseas. Finally, the conclusion is overseas investment is a part of strategic doing the international business. Overseas investments allows companies to take over the assets of another company such as become the majority shareholder in order to the company can control another company that exist in an investment destination ( called host country) either partially or completely. By way of this acquisition, the company expects to gain maximum profit and also be able to meet the market demand, especially in the cement industry.