Vietnam - Business acquisition on rise in economic gloom

Listed firms are on the hot seat after more merger and acquisition (M&A) deals have taken place amidst this year’s turbulent economy.

Their share prices have dropped so dramatically that they are afraid of possible takeovers by investors with deep pockets.

At a recent shareholder meeting of a commercial joint stock bank, regarding the time when the bank will issue more shares for the stock market, the bank chairman said the issue is still under consideration given the takeover concern.

The concern stems from the fact that another commercial joint stock bank headquartered in the northern region of the country has been rumored to be the next target of a banking M&A deal. About 36 percent of its shares have been traded on the stock market recently.

Existing shareholders and top officials of another commercial joint stock bank in southern Vietnam have been rushing to buy the bank’s shares to prevent the worst-case scenarios.

Successful deals

Two investors have publicly offered to buy the shares of TNG Investment and Trading Joint Stock Co at VND16,000 per share, up VND7,300 per share compared to their previous offering.

This has also happened to TRA-coded shares of Traphaco Joint Stock Co and TRI-coded shares of Tribeco Beverage Drink Co.

Previously, there have been many such transactions via the stock market, including the buyout of the shares of Vinacafe Bien Hoa Joint Stock Co by Masan Joint Stock Co and of Agrifish Joint Stock Co by Hung Vuong Joint Stock Co.

However, many experts said such M&A deals will make business costlier for investors.

The price of shares will surge when the information about the deal is publicized on the stock market, let alone the fact that the targeted firms will automatically erect protective measures and thus raise the costs for the deal.

As a result, many have chosen to form a temporary alliance of smaller investors to become a group with a decisive role, which can place pressure on the process of setting up of a new board of directors, and thus can redirect the firm’s operational strategies following their wishes.

However, if investors want to realize their M&A deal in such a form of unpublicized moves, they are often unwelcomed by the targeted firms.

The deal of DCC-coded Descon Joint Stock Co, in which a group formed by those owning less than 1 percent announced to hold 35 percent shares, has led to the delisting of the stock.

Such a form of acquisition will face strong opposition since it is unclear whether they will focus on improving the firm or occupying its assets only, said the general director of a securities firm.

The general director of a listed real estate firm said that as many realty developers have suffered hefty losses from the frozen realty market, their shares hit the floor though the value of their assets in the form of realty projects were still very huge.

“So, for us, if we have been targeted by those investors, we must brace for the worst case when the companies are suddenly under their control,” he added.

“It’s extremely difficult for us to be immune from such acquisitions, since we cannot buy more treasury stocks without money, and cannot issue more shares to the market without being profitable.”

“Even in the case that we can make a profit, it’s unpromising for our shares to be sold out since their prices are lower than their face value.”

Big firms with huge potentials in the form of assets and realty projects located in prime locations but facing the same problems are good targets for such deals now, said many experts.

The higher the outstanding shares, the higher the risk.

Stock trading time on Vietnam's two markets will be extended into the afternoon starting today in a move to boost investment sentiment, according to Reuters.

The new session will begin at both the Ho Chi Minh Stock Exchange (HoSE), the country's main market, and the Hanoi Stock Exchange, and end at 2.15 p.m.

Trading in Vietnamese shares on the two markets has so far been limited to the morning, with order-matching transactions ending at 11 a.m.

TUOI TRE

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