Vietnam - Merger, acquisition deals tipped to increase

Merger and acquisition activity is expected to further increase this year, following high-profile deals last year such as food products company Masan Consumer's acquisition of coffee processor Vinacafe Bien Hoa (VCF) and the merger of real estate developer Vincom (VIC) with resort operator Vinpearl.

Aureos Capital director Dang Doan Kien and Viasa Investment Fund chairman Alan Phan predicted mergers and acquisitions (M&A) will be most prevalent in the banking, securities and real estate sectors in the coming year.

Low stock prices in these sectors have made takeover efforts more likely, Phan said.

Around 80 per cent of shares on both of the nation's stock exchanges have market values below book value, and 59 per cent of all stocks are being traded below par, said State Securities Commission chairman Vu Bang.

Low valuations have generated difficulties for these companies in raising capital, stated a report on M&A conducted by financial media firm StoxPlus. "While it's hard to get loans from banks, businesses are more willing to merge," the report said.

In the banking sector, with the central bank determined not to let any banks go bankrupt, smaller and weaker banks would probably be merged, Phan said. Although listed banks have been involved in such deals yet, rumours have emerged involving possible tie-ups between Eximbank (EIB) and Sacombank (STB), and Habubank (HBB) and Sai Gon-Hanoi Bank (SHB).

Consolidation is another M&A trend likely to be on the rise and companies struggle to remain competitive in a tough economy. Two subsidiaries of Binh Duong-based Truong Thanh Furniture (TTF) will be merged into the mother company, targeting to make the most efficient use of capital and human resources.

"At the shareholders' meeting this month, we will come up with a final decision on a stock swap ratio," said TTF deputy director Ngo Thi Hong Thu.

At its shareholders meeting slated for Mar. 22, construction firm Song Da 6 (SD6) will also consult its shareholders about a merger with Song Da 6.04 (S64).

SD6 leaders said that the merger will help the mother company focus on funding for key projects as well as achieve cost savings through the closure of ineffective offices, staff reductions and lowered procurement costs.

Acquisitions will also be able to wield greater financial leverage. Viet Nam–Italy Steel Co (VIS) general director Tran Van Thanh told the newspaper Dau tu Chung khoan (Securities Investment) that its plan to acquire the Song Da steel mill, worth over 469.2 billion VND (22.3 million USD), "will assist our company in improving financial capacity and increasing competitiveness." VIS currently holds a 42.5 per cent stake in the Song Da mill.

VIR - VNA

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