Vietnam - Jury out on telco merger deal

Competition Law question marks hang over VNPT’s VinaPhone and MobiFone merger plan

>> Ministry yet to approve VNPT’s merger plan: official

>> MobiFone and VinaPhone set for a merger

The Ministry of Information and Communications’s (MIC) 2011 Information Technology While Book showed that VinaPhone held a 28.71 per cent market share and MobiFone 29.11 per cent market share in subscriber counts.

Assuming MobiFone and VinaFone were merged under a VNPT scheme (both operators are managed by VNPT, a leading state telecom group), the VNPT would hold a dominant share in three crucial segments in the local telecom services market, with the fixed line segment at a 72.94 per cent market share, internet surfing 72 per cent and mobile phone services 57.82 per cent.

The plan would be banned if the Law on Competition’s Clause 18 was factored in, which stipulates that an economic concentration will be prohibited if combined share of businesses surpassed 50 per cent of total market share.

However, this alone is not enough to hurt these big telecom operators’ merger plan.

Decree 25/ND-CP/2011 guiding the implementation of some articles in the Telecom Law stipulates for economic concentrations in the telecom services market in which the combined market share of relevant businesses ranging from 30-50 per cent relevant businesses are obliged to report to specialised telecom management authority. If the combined market share surpasses 50 per cent, the Minister of Industry and Trade will issue exemption decisions after getting exemption documents from MIC.

Clause 19 in the Law on Competition, however, presents two exemptions.

Lawyer Tran Vu Hai, head of Tran Vu Hai Lawyer Office and Hanoi Law Company, argued exemption regulation only took effect if the two would-be-merge businesses dissolved or went bankrupt. In this case, both MobiFone and VinaPhone are healthy and operating profitably.

“These two operators’ merger violates the Competition Law or not depends on work results by the Competition Council factoring on the date of birth of the Competition Law, the foundation of these two operators and relevant documents,” said Hai.

The Ministry of Industry and Trade’s Vietnam Competition Authority deputy chief Vu Ba Phu said market share was not a sole criterion in considering the deal. “Enhanced competitiveness after a merger, market access capacity and opportunities for new comers are more important factors. Management and supervision by relevant state bodies in post-merger period is of foremost importance since the market share may vary year-on-year,” said Phu.

In fact, under the Competition Law, exemption also applies in case merger and consolidation helps expand export and brings benefits to sciences and society. In this case, firms must submit exemption records to the Vietnam Competition Authority and the government, the final decision is pending on the prime minister.

From an observer’s angle, Freshfields Bruckhaus Deringer Vietnam managing partner Tony Foster said any MobiFone and VinaPhone merger would undermine Vietnam’s telecom market competitiveness. Operation by two leading state giants VNPT and Viettel should be put under close eyes by management authorities to shield consumer interests.

“The best option in restructuring VNPT would be equitising MobiFone,” said lawyer Tran Vu Hai, adding that state interests should be taken as the top factor in VNPT restructuring plan.

Hai suggested the state hold 51 per cent stake in MobiFone after equitising in which VNPT keeps 20 per cent with the remaining 32 per cent to be retained by the State Capital Investment Corporation.

Tuan Huyen | vir.com.vn

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Vietnam - M&As to fuel investments

A research team for the annual M&A Vietnam Forum, to take place in June with VIR the organiser, puts Vietnam’s foreign-related M&A activities and prospects in 2012 under the microscope.

Cross-border mergers and acquisitions activities are valued at thousands of billions of USD annually and create conditions for investors to access their target markets very quickly.

In Vietnam, figures from mergers and acquisitions (M&A) research organisations including Thomson Reuters, IMAA and AVM Vietnam show that the total value of M&A deals in Vietnam last year reached nearly $4 billion, an impressive step up from the 2010 figure of $1.7 billion. Of this, over $2.6 billion originated from deals involving foreign investors.

Thus, M&A in general and foreign-related M&A in particular, have played an important role in Vietnam’s investment activities. This presentation will deal with prominent characteristics of Vietnam-based foreign-related M&A activities, and provide a forecast for M&A while giving future recommendations.

Characteristics and trends

Foreign-related deals made up 66 per cent of the value and 77 per cent of the quantity of the total value of $4 billion of Vietnam’s M&A deals last year. The highest profile deals in 2011 included Russian VimpelCom increasing its ownership rate in the joint venture Gtel-Mobile to 49 per cent, IFC purchasing a 10 per cent stake in Vietinbank, Mizuho purchasing a strategic holding in Vietcombank, and Carlsberg buying out Hue Brewery Company to become the sole owner of that firm.

The main reason for the rise in the foreign-related M&A deals in Vietnam is that foreign investors have realised there are more favourable investment opportunities in purchasing local firms than directly investing in the country. Besides, in 2011, deals related to selection of strategic investors were also realised.

Financing, consumption and property as foreign investors’ targets

Foreign investors had their eyes glued on the consumer goods, banking and property sectors for M&A deals concluded in 2011.

The consumer goods sector saw the most attractive growth, with a total value of $1 billion in M&A deals, occupying 25 per cent of total value of all deals in Vietnam last year. Large deals coupled with purchasing of dominant stakes have demonstrated a trend in which foreign investors are expanding their value chains and markets via M&A. Deals such as the Unicharm – Diana, Marico – ICP and Carlsberg – Hue Brewery are emblematic.

The financing-banking sector has also been of interest to foreign investors. The Mizuho – Vietcombank, IFC – Vietinbank and PVI – Talanx deals show that foreign investors still want to become strategic investors in large local equitised financial organisations.

As for the property sector, it was a difficult 2011 that fuelled property-related M&A activities, with the total value of deals estimated to be $250 million.

Japan’s investment trend

Last year, Japanese groups contributed the largest amount of cash to Vietnam’s M&A market, with the deals involving these groups totalling $596 million. Japanese investors tended to pour their cash into the consumer goods and financial sectors, which have witnessed high growth over the past few years and are also the investment targets of many foreign financial institutions.

The most typical deal in the financial sector was Vietcombank’s sale of a 15 per cent stake to Mizuho. This was the second time that a Japanese bank had become a strategic stakeholder of a Vietnamese bank. The first involved Sumitomo Mitsui Banking Corporation’s purchase of a 15 per cent stake from Eximbank.

Meanwhile, the consumer goods sector saw Unicharm purchasing a 95 per cent stake from Diana, with the total value of the deal estimated to be $129 million. The sector also saw Kirin Holding purchasing a dominant stake from Interfood (IFS), Daio Paper buying a holding from Saigon Paper, and Glico buying 10.5 per cent of Kinh Do Company.

Assessment and forecast

As with attracting foreign direct investment, the most important factor for luring foreign investors into M&A in Vietnam is a stable macroeconomic climate. It is also necessary to put in place legal regulations that are in line with international practices.

Vietnam’s restructuring of state-owned enterprises is also important to coax more foreign direct investment via M&A activities. Thus the government needs to accelerate equitisation of large state-owned enterprises operating in the sectors coveted by foreign investors.

As for local companies, the lack in transparency in corporate governance and weak cooperative culture are bottlenecks in attracting foreign investors. Thus local companies need to renew themselves to make themselves more attractive to foreign investors. Vietnam’s M&A growth rate over the past five years has been 30 per cent on average. Thus we believe that this rate will continue to exceed 30 per cent annually in future.

Foreign-related M&A activities will continue to play an important role in the growth of M&A deals in Vietnam. Fuelled by the government’s restructuring of state-owned enterprises, more large M&A deals can be expected. This is especially true for deals to select foreign strategic partners in large equitised state-owned enterprises like Mobifone and VNSteel.

A survey conducted in preparation for an M&A Vietnam forum last June in Ho Chi Minh City revealed some 65 per cent of surveyed foreign investors said they were interested in M&A opportunities in Vietnam and would come to the country to hunt out these opportunities. This shows Vietnam can expect more high value foreign-related M&A deals this year.n

*The research team includes Dang Xuan Minh from AVM Vietnam, Dr. Nguyen Viet Khoi at the Economics University and Dr. Pham Tien Dat of the Institute of Banking.

vir.com.vn

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Vietnam - M&A boom in southern markets

Mergers and acquisitions are on the rise as investors seek to be more profitable and avoid going bankrupt.

Ho Chi Minh is currently the hub for such deals. One of the first major deals was in 2011, when Singapore's Dancin Holdings bid for Tan Tao A urban area project, owned by Khang An Investment Real Estate JSC. It later was shored up when the property fund company JSM Indochina announced that they would transfer the land use rights of Peninsula project to Sao Sang Saigon JSC.

In 2012, the pace of M&A picked up in real estate market, when Capita Value Homes Company acquired 70 per cent stake in a high rise project from Khang Dien Saigon JSC, and also Hoang Anh Gia Lai buying 100 per cent another project in District no. 7

Many companies have decided to transfer their projects. Hoa Sen Group said it is considering transferring a series of its real estate projects, including Hoa Sen Phuoc Long and Hoa Sen Riverside Apartments, Hoa Sen - Gemadept Airport. A number of industrial zones or resort projects in Hoa Binh Corporation are also set for transfer.

Also, Dat Xanh Investment Corporation has made successful acquisitions of four property projects, including Majestic and Gold Hill projects in Dong Nai Province, the Bella in Ho Chi Minh City and the Marina in Binh Duong Province. Thien Minh Group also took over the Victoria Hotels property in Vietnam.

One of the biggest players in these deals has been the C.T Group. In March, the group announced its $24 million bid for South Korea's GS firm to develop golf projects in Cu Chi District, Ho Chi Minh City.

Previously, the acquisitions were often made by foreign companies, trend has been changing. Vietnamese firms have been making a series of large M&A deals.

A representative of the C.T Group said the deals are being made not only in the realty market but in other industries as well, with the busiest areas in Ho Chi Minh City and southern regions.

dtinews

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Vietnam - VNPT to merge its two mobile operators

The Vietnam Post and Telecommunication Group, or VNPT, is set to merge its two mobile operator subsidiaries, VinaPhone and MobiFone, under its restructuring process, the company’s Deputy CEO Lam Hoang Vinh has confirmed.

>> VNPT promises not to make waves

Vinh, who is also Vinaphone’s director, said on Monday that the Ministry of Information and Communications has green-lighted the merger plan.

“The ministry will then submit the plan for final approval from the government,” he said.

Under the merger process, VNPT will keep the mobile networks and infrastructures of the two telecom providers, the state-run telecom giant said.

After merging, the two mobile service operators will mutually exploit VNPT’s network infrastructures, while the mobile phone numbers of their subscribers will be maintained.

The merger decision came about after the government last year issued a new regulation on telecom ownership, which came into effect on June 1, 2011, stipulating that an investor with more than a 20 percent stake in one telecom firm cannot own more than 20 percent in another.

The new rule has forced VNPT, which owns 100 percent of both VinaPhone and MobiFone, to choose between divesting from one of the two operators, or merging them.

It is thus a dilemma for VNPT, as both VinaPhone and MobiFone are too lucrative to give up, with the latter contributing half of VNPT’s total profits, market analysts said.

However, merging the two networks would create a giant mobile phone company that could hurt competition in the market, they warned.

Tuoi Tre

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Vietnam - The Age Of Hostile Takeover Deals Conducted By Hidden Tycoons

The news about the hostile takeover deals appear repeatedly on local newspapers. Experts say more and more deals would be made, because it is now the right time to acquire other businesses at low prices.

Attacking others to occupy their business bases

Buying or selling businesses is not a new thing in Vietnam at all. A lot of acquisition deals have been carried out in the last few years, in which the new owners of businesses collected the targeted businesses’ shares on the stock market. These included the deal where Hung Vuong bought AGF, or PNj bought SFC, Masan Consumer bought VFC, HT1 merged into HT2 and Mirae into Mirae Fiber.

However, the recent takeover deals seem to go very quietly and unexpectedly, which are considered the hostile takeover. In the current economic difficulties, a lot of enterprises face big difficulties. Meanwhile, the stock prices keep decreasing. These factors all bring the golden opportunities to big businessmen to acquire other businesses.

The war to gain the control over Sacombank, one of the biggest banks in Vietnam, has become the hottest topic among financial experts. Eximbank, also a big bank in Vietnam, has stated that it has obtained enough share proportion to ask Sacombank to restructure of the board of directors. Meanwhile, Sacombank’s managers have denied the information.

The war has not come to an end. However, sources said that the two sides have reached initial agreements on the division of the seats in the board of directors, under which, in the immediate time, Dang Van Thanh would still be the President of Sacombank.

In 2011, the information about the changes in the leadership of Seafood Company No. 1 (SJ1) once stirred up the investors. The president of the company, general director and deputy general director all stepped down at the same time. The takeover was very smooth.

Only at that time did people realize that the process of swallowing SJ1 began one year ago. In the period from March 2010 to May 2011, Tran Van Hau, now President of SJ1, who was then a member of SJ1’s board of directors, gradually increased his share proportion in SJ1 from 7.79 percent to 24.23 percent. Meanwhile, the Hung Hau Development Company, in which Hau was a member of the board of directors, also purchased SJ1 shares in big quantity to become a big shareholder of the seafood company.

It’s difficult to resist the attacks from behind

In 2010 and 2011, the takeover deals which caught the biggest attention from the public were the purchase of Ha Tay Pharmacy in 2010 and the purchase of Descon in 2011.

In the case of Descon, a construction company, at the extraordinary shareholders’ meeting of the company in late 2011, two members of the board of directors–Nguyen Xuan Bang and Nguyen Van Thuong had to leave the posts of the members of the board of directors with 81 percent of votes.

With the statement of holding 35 percent of Descon’s stakes, Binh Thien An Company then took different steps to officially take over Descon. Currently, two out of the five members of the board of directors are the managers of Binh Thien An.

Most recently, the investors whispered into each other’s ears the information that a “big guy” had been quietly collecting nearly 16 percent of the stakes of Sudico, a well known real estate firm on the stock market

After the deal, the big guy showed himself as the one of the 30 richest stock millionaires in Vietnam. He is Do Van Binh, President of Dai Duong finance and construction group with the headquarter in Bac Ninh province. Binh is also the member of the board of directors of Maritime Bank since 2008.

Commenting about the deals, analysts say that the suddenness was the most outstanding feature of the deals, and that when someone is attacked suddenly from behind, he would fall quickly.

Vietnamnet

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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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Malaysia - Khazanah buys into listed Sri Lanka conglomerate

KUALA LUMPUR: Khazanah Nasional Bhd, via its special-purpose vehicle Broga Hill Investments Ltd, has acquired an 8.85% stake in John Keells Holdings Plc (JKH), Sri Lanka's largest listed conglomerate, in a deal worth RM366mil.

The JKH group had business interests in several key sectors of Sri Lanka's economy, including tourism, transportation, leisure and tourism, property, retail and financial services, Khazanah said in a statement.

Khazanah managing director Tan Sri Azman Mokhtar said: “The entry into JKH offers Khazanah and its group of companies opportunities to participate across a wide range of businesses where the JKH group is involved in.

“At the same time, it allows Khazanah to participate in Sri Lanka's positive growth story and is in line with our strategy of investing in the region.”

Sri Lanka is already a positive experience for Khazanah's investee companies.

Axiata Group Bhd subsidiary Dialog Group Bhd is the largest mobile telephony player in Sri Lanka while the CIMB Group has established an investment banking joint venture in the country.

Sri Lanka is currently experiencing a strong economic revival post-conflict as evidenced by the recent annual economic growth of about 8%.

Bernama

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Vietnam - Japanese investors eyeing Vietnamese listed companies for M&A deals

VietNamNet Bridge – Analysts say Japanese investors are targeting consumer goods manufacturers, retailers and finance groups with reasonable values. The number of M&A deals is expected to be double this year. 


The 2011 white book about M&A of PricewaterhouseCoopers (PwC), an international auditing firm said that Japanese investors, who are now under the pressure of the population and domestic demand decreases, now tend to make outward investment. Together with China and India, Vietnam has become the aiming point in Japanese investors’ M&A strategy.

According to PwC, the Japanese population, after reaching its peak in 2007 with 128 million people, would decrease to 120 million by 2025 and approximately 100 million people by 2045. The country’s problem not only lies in the population decrease, but also in the increase of the number of old people. It is estimated that by 2045, the number of people aged more than 65 would account for 38 percent of the total population.

These are the two main reasons which have prompted investors to look for newly emerging markets, including Vietnam.

Also according to PwC, the survey conducted on 98 private businesses listing their shares on Tokyo stock exchange--has pointed out that the potentials on the market growth and the good labor force in Vietnam are really the attractive factors for the Japanese businessmen.

In fact, the M&A transactions between Vietnamese and Japanese businesses began increasing after Vietnam joined the World Trade Organization WTO in 2007. Though the transactions were interrupted in 2008 and 2009 due to the global finance crisis, they have regained the growth with 16 M&A deals completed in 2011, while the figure is expected to be double this year.

According to investment consultancy firms, Japanese investors tend to target Vientamese listed companies which have the value of 5 million dollars at minimum and 100 million dollars at maximum, which operate in the fields of consumer goods, finance and banking, and retail.

Tosifumi Iwaguchi, Managing Director of Recof Corporation--which specializes in giving advices about M&A deals in Vietnam, said on Dau tu that recently, more and more Japanese businesses come to Vietnam, and they not only see Vietnam as a consumption market, but also plan to turn Vietnam into their production bases.

While some Japanese investors only make capital contribution to hold minority proportion of stakes, others try to collect enough shares to hold controlling stakes which allows them to join the board of directors and manage the business. The move by the Japanese investors to collect shares in big quantity has been described as the move to swallow Vietnamese businesses, which has raised big worries to Vietnamese businessmen. 

Nguyen Thanh Phong, Deputy General Director of the Hanoi Stock Exchange, said that Vietnamese businesses need to choose one way for themselves in the current big difficulties. “If they are not capable to hold out, they should be accepted to be partially swallowed, which would help them survive and develop,” he said.

Consultants have said that Japanese investors have all been satisfied with the M&A deals made recently. In general, it takes Japanese investors a lot of time to learn about the Vietnamese market and the Vietnamese partners. Japanese investors always draw up detailed plans on the business development strategy when implementing their business plans. They always know exactly which market segments they would target, who will be the main clients to consume their products and what prices should be reasonable.

According to Tosifumi Iwaguchi, there is a thing that would make Vietnamese businessmen feel secure that Japanese businesses would not escape from the market or give up the projects they commit before. He has also mentioned the possibility of approaching the high ranking executives, who can make decisions, of 20,000 Japanese companies listing on the Tokyo stock market. If so, Recof Corporation would be able to act as the bridge to link Vietnamese and Japanese businesses.

Source: TBKTSG


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India - Partnerships are a better alternative to acquisitions

Engelbert C. Tjeenk Willink, member of the board of managing directors at the German drug maker Boehringer Ingelheim GmbH, was in India last week to chalk out the company’s new India strategy, Asia’s fastest growing pharma market.

In an interview, Willink said Boehringer now wants to be an important part of the country’s pharmaceutical industry and will invest heavily to boost growth. Edited excerpts:

Boehringer, despite being present here for almost a decade, has not become quite visible in the local market as yet. And, the fresh move happens at a time when almost all top drug makers of the world as well as the local industry have already established strong bases.

Won’t this make your new growth efforts more challenging?

We were late to make this move. Not having strong patent regime in the country was a barrier in entering India earlier. But now, we clearly want to invest and expand our presence in India. As a company that is built on innovation and heavy investments in research and development (R&D), we don’t consider ourselves a generics company and don’t want to get into generics in a big way. So, as long as that kind of framework doesn’t exist, it’s not an interesting opportunity for us. When you invest more than €2 billion in research (annual research budget), IP (intellectual property) becomes important.

At the same time, we understand the challenge of being in a market that is competitive. As a family-owned business, we have always followed a different strategy compared with the competition, and we do believe in a sustainable model and not in growing overnight through inorganic way and be under pressure to cut size to sustain later.

Are there IP-related concerns now?

We still believe that the IP-related situation in India is not optimal but it clearly has improved strongly. There are many challenges, be it around IP or be it around pricing for an innovative company like ourselves to go into the Indian market.

We established a company here in 2003. At that point in time, most of our products were still running here through an earlier licensing deal with German Remedies Ltd, which was later acquired by Zydus Cadila (Cadila Healthcare Ltd). And now, particularly for our prescription area, we’re building up our own presence. There are two new products from our own research pipeline under patent protection that we’re launching this year—one in diabetes and one in stroke prevention, in addition to five speciality products already in the market. We hope to launch our oncology portfolio in 2013-14. So, we’re in a relatively luxury situation of having a well-filled late-stage research pipeline to feed the market requirements for a sustainable operation.

What are your expansion plans in India?

Our expansion plans are always built on the innovation that we bring from our pipeline. The strategy of this company is not to acquire like some of our competitors. We build our products and our portfolio. We expect to launch all the products that come out of our pipeline, be it in OTC (over the counter) or animal health vaccines. But this does not exclude smaller acquisitions or licensing opportunities.

At this point in time, there are no plans to build up production capacity here. We either source from other countries into India or we work with local firms. We have 400 people in the field now for seven products (including the two sold by Zydus). It will expand significantly both in terms of people and products. But if you ask me whether we will make acquisitions of big generic companies here, I can clearly say that it doesn’t fit into our scheme of things. But we may have partnerships, collaborations for marketing production and even research, which are better alternative to acquisitions.

Will there be differential pricing for India?

For some of these products which are biological, there is not much of a price difference. We’re always concerned about the competition and also whether our products are more expensive than generics in other areas. So, we will try to find an optimum way to bring our drugs to as many people as possible, but it has to be in a way where we can a continue to have a business. But of course, we will expect that the investment in the innovation that we have done will be rewarded. But the issue here is not the cost alone. Even with cheaper generics, not everybody in India can afford medicines today. So there are limits to what we can achieve in this regard.

C.H. Unnikrishnan & Namrata Nandakumar

livemint.com

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Vietnam - Japanese firms keen on M&As

M&A (merger and acquisition) activities in Vietnam were forecast to continue rising this year, particularly in the partnership with Japan, heard a seminar on attracting IPO and M&A partnerships between Japanese and Vietnamese enterprises held on March 6 in Hanoi.

Although the total number of M&A deals decreased from over 340 in 2010 to around 250 last year, the total value of the deals more than doubled during the period, increasing from $1.7 billion in 2010 to $4 billion in 2011, said Nguyen Anh Phong, deputy general director of the Ha Noi Stock Exchange.

Last year saw an increase in the interests of Japanese companies in Vietnam's M&A market, with 23 per cent of total deal value coming from Japan, Phong said, citing remarkable deals reached last year including Mizuho bank purchasing a 15 per cent stake worth $543.8 billion in Vietcombank and Unicharm buying a 95 per cent stake worth 125 in Diana Vietnam.

Phong revealed finance and consumer goods were the two most appealing sectors to Japanese enterprises, with 50 per cent of the deals struck in these sectors.

Director of the New Listing Department of the Tokyo Stock Exchange, Yasuyuki Konuma, said Japan was the world's largest investor and its wealthy individual investors were keen on investing in Asian stocks.

"Japanese household assets are the highest in the world at $19.48 billion, of which cash/deposits in banks account for 55 per cent," Yasuyuki said, emphasising that the Japanese government was encouraging people to invest their savings.

"Investment in Vietnamese companies is the highest since 2009."

Toshifumi Iwaguchi, director of RECOF Corporation, said decreasing population and domestic demand were driving Japanese companies to invest abroad.

Recent statistics demonstrated that the number of Japan-outbound M&A deals was rapidly increasing, with Japanese enterprises being highly interested in M&As in Asia, Toshifumi said, noting the number of outbound M&A deals with Asian companies last year rising 41 per cent year-on-year.

"Vietnam ranks third after China and India as a possible investment destination through M&As," Toshifumi said, explaining strong interest in Vietnam was based on its market growth and workforce.

Some Japanese companies preferred entering the Vietnamese market by co-operating with Vietnamese partners with existing market shares and knowledge, he said, adding while some Japanese firms tended to buy minority stakes to limit their investment risks, others chose to acquire majority stakes to take control of the target company.

Toshifumi said Japanese firms targeted a wide range of sectors but the percentage in the manufacturing sector had been steadily increasing, from 10 per cent in 2007 to 39 per cent last year.

Welcoming Japanese capital investment, Deputy Minister of Planning and Investment Dang Huy Dong said seeking capital to stabilise and expand business was now the most important issue to Vietnamese companies, and M&As were an effective channel to raise capital.

"The economic relationship between Vietnam and Japan has been increasing strongly in recent years and Vietnam expects the two countries' co-operation in the M&A industry will also be strengthened in the future," Dong said.

Dong said that recent M&A deals were still impulsive and unprofessional due to the lack of an appropriate legal framework, industry expertise, human resources and professional consultancy.

Therefore, in order to allow M&A deals to develop and protect the rights of participating companies, authorities would draw up M&A regulations as well as promote co-operation between management bodies and enterprises to provide information and training in new business activities.

VIR - VNA

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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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YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Consulting, Investment and Management, focusing three main economic sectors: International PR; Healthcare & Wellness;and Tourism & Hospitality. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programs. Sign up with twitter to get news updates with @SaigonBusinessC. Thanks.