• Gallant Ocean International Inc.: Creating a Win-Win Situation by Forming a Joint Venture in Vietnam

Abstract

Gallant Ocean International Inc. and Great Wall International Holdings Ltd., a subsidiary of DaChan Group, formed a 50-50 joint venture (JV) under the name Gallant DaChan at Quảng Ngãi in Vietnam on July 25, 2011, and Gallant DaChan received a US $1.5 million payment from Great Wall. The two businesses planned to jointly establish vertical integration in the tilapia supply chain. On February 24, 2010, the Quảng Ngãi plant (the predecessor to the Gallant DaChan) received a US$1.15 million investment from Gallant Ocean. This plant was initially engaged in shrimp processing. Because Gallant Ocean intended to further invest the tilapia business at the Quảng Ngãi plant, the company needed to acquire external financing due to the credit line reduction, which also affected its choice of investment path. How would Gallant Ocean attract a partner if the company decided to invest by forming a JV? Why would DaChan Group form a JV with Gallant Ocean in Vietnam? Is there a win-win bargaining range for the JV investment amount and shareholding transactions? Are there any potential risks for each company to consider? This paper presents the real case of an overseas JV involving two Taiwanese businesses. It focuses on the investment analysis of both parties before entering a JV. Based on the aforementioned questions, we elucidate the advantages and disadvantages of forming a JV.

Keywords: Expansion, Joint Venture, Vertical Integration