Fuchs Picks Up Vietnam Distributor

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Fuchs Picks Up Vietnam Distributor
Scooters and cars on a crowded street in Ho Chi Mihn City. Fuchs acquired 70% of the lubricant business of Vietnamese distributor STD & S, which will hold a 30% share in the Fuchs Lubricants Vietnam Co. subsidiary. The joint venture is expected to enable Fuchs to offer its customers autmotive, industrial, mining and specialty lubricants from a single source. © Miroslaw Gierczyk / shutterstock.com

Fuchs Group announced this week that it has purchased a controlling stake in the lubricants business of Vietnamese distributor STD & S Co., aiming to expand in the country’s growing lubricant market.

It becomes the latest in a series of distributor acquisitions for the German independent lube manufacturer.

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In a Feb. 9 press release, Fuchs said it purchased a 70% stake in STD & S’s lubes business for an undisclosed amount. STD & S, which is based in Ho Chi Minh City, supplies products ranging from conveyors and chains to packaging robots to businesses in industries such as mining, construction and textiles. It retains sole ownership of the segments dealing in items other than lubricants, as well as a 30% stake in the lubes business.

The lubricants operation employs 13 people and recorded sales revenue of €4.5 million (U.S. $5.4 million) in its 2020 fiscal year, Fuchs said. Officials said the transaction puts Fuchs in better position to expand in a market that is growing.

“Vietnam is an emerging market with great growth potential,” Timo Reister, an executive board member responsible for Asia-Pacific, said in the press release. “This joint venture emphasizes our ambition to establish ourselves in Vietnam in the long term and to expand our business there.”

Mannheim, Germany-based Fuchs is the world’s largest independent lube manufacturer and one of the industry’s most active companies in terms of mergers and acquisitions. In the past, most of its acquisitions were lubricant manufacturer-marketers, but in recent years that activity has focused more on lubricant distributors. Since November of 2017, seven of 13 deals have involved distributors in which Fuchs acquired at least a 50% stake.

An industry analyst said distributor acquisitions are usually motivated mainly by a desire to increase sales.

“When they [Fuchs] were buying up producers, they would have been looking at the technology side and trying to add product lines that they were not so strong in,” said Steve King, of SJK Marketing Services Ltd., a consulting firm in Swindon, United Kingdom. “When any company buys a distributor, that’s more about expanding their footprint because it’s one of the best ways to get into a market quickly.

“When you go that route, however, the challenge is finding a distributor who is going to do what you want. The challenge is always are the two parties working on the same objectives. So if you can acquire equity or the whole company you can bring them into the fold and it gives you more control.”

Fuchs noted that it has been dealing with STD & S for more than a decade. In 2014 the German company established a Vietnamese subsidiary that also supplies customers separately from STD & S. Nina Consagra, Fuchs’ manager for public relations and marketing, said the subsidiary’s sales now exceed STD & S’s sales of Fuchs lubes and that Fuchs products account for most of the distributor’s lubes sales.

Fuchs’ other distributor acquisitions since late 2017 were in Italy, Mozambique, Zambia, Zimbabwe, Chile and Romania. In all or most of those cases the German company had a prior business relationship with the local companies.

Consagra said Fuchs has not shifted focus away from acquiring lubricant manufacturers. “There is no strategic group decision to focus on acquisitions of distributors,” she said. “We remain open minded and do whatever fits best.”