Hung Vuong, the top pangasius producer in Vietnam, has acquired a 51% stake in the Russian Fish Joint Stock Company, a subsidiary of Russia Aquaculture Company, for US$15 million.

 

A leading global source of Alaskan Pollock and major distributor of fish products that it imports from 18 global markets, the Russian firm reported after-tax profits in 2015 of US$15 million. It will provide Hung Vuong with a stable platform from which to launch into the Russian market, according to Hung Vuong Chairman and CEO, Duong Ngoc Minh, reports Seafood Source.

 

Although it is historically rare for a Vietnamese company to acquire a Russian asset, this deal comes nine months after the signing of a free trade agreement between Vietnam and the Eurasian Economic Union that eliminated all tariffs on fish imports from Vietnam to Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan. The deal is also apropos in light of the fact that Russia is Hung Vuong’s third biggest market after the EU and the U.S., with exports valued at $400 million last year, according to The Diplomat.

 

However, what might have played an additional role in driving the deal is the international conflict surrounding the Mekong River and its effects on food security in the region. Vietnam views the river as a food source and key to its food security, however, Laos views the river as a source of hydroelectric power. Contrary to the interests of its neighboring countries, the scientific community, and environmentalists, Laos has embarked on a controversial nine-dam construction project that could threaten to cut the regional fresh fish supply by 50% and is driving down-river countries and companies to look toward aquaculture activities. Indeed, Cambodia is considering following suit, and is exploring the possibility of building two of its own dams across the mainstream of the river.

 

“When you have eleven dams there ain’t a lot left when you get to the bottom,” Ian Cox, director of the International Fisheries Institute at Hull University was quoted as saying by the Phnom Penh Post at the Greater Mekong Forum on Water, Food and Energy in Phnom Penh last year, reports The Diplomat.

 

In the face of these challenges, the Russian sanctions of Western foods and agricultural products, Russian consumers’ preference for whitefish varieties, and softer sales in Hung Vuong’s two major market of the U.S. and the EU, Seafood Source suggests that the deal has the potential to open great opportunities for Hung Vuong in both increased sales and synergies.

 

The group is expecting to see exports of between US$500 million and US$600 million in 2016, of which exports of fish are expected to be worth between US$200 million and US$250 million, and shrimp exports are expected to be between US$300 million and US$350 million. The group is also expecting to see synergistic integration between the two companies through Hung Vuong being able to use its underutilized pangasius plants to fillet and freeze Russian-caught Alaskan Pollock at a lower cost than processing in China.