M&A Activities to increase in 2010

At a press meeting prior to Vietnam M&A Forum 2010 scheduled on May 25 in HCM City and May 26 later in Hanoi, representatives of funds, consulting units and Ministry of Planning and Investment (MPI) spoke that M&As will depend much on the recovery of the world’s economy and Vietnam’s, governmental policies and the strategy of investors. In the context that the credit growth stands at 25 percent and P/E ratio of the stock market now reaches 15-16 times, Vietnam will not likely see any economic breakout in 2010.

Merger and acquisition (M&A) activities in 2010 are predicted to increase more highly than 2009 but not yet really exciting, according to specialists.

In M&A deals, the strategic partners previously were comprehended to be foreign institutions. But the concept on strategic partners recently changed.

According to statistics, the number of deals of Vietnamese enterprises buying back local partners last year accounted for 40 percent of total market trade while those of deals in which Vietnamese firms take over foreign businesses made up 4.62 percent.

In 2009, the specialists appreciated an interesting deal relating to the overseas investment of a bank. Particularly, Bank for Investment and Development of Vietnam (Bidv) finished the establishment of IDCC Investment and Development Joint Stock Co with a chartered capital of $100 million (contributed by Bidv and Southern Co) last July. Later, IDCC officially bought back Cambodia’s Prosperity Investment Bank (PIBank) at $2.8 million and changed its name to Bank for Investment and Development of Cambodia (BIDC).

As planned, BIDC will have total assets of $303 million and total deposits of $210 million by 2012. The succesfull deal also was followed by the setting up of Cambodia Vietnam Insurance Co (CVI) whose 90 percent charter capital was held by IDCC.

Previously, top telecom group Viettel, after becoming the strategic partner of Military Bank in 2009, continued implementing the deal of purchasing 35 million VCG coded shares [18.9 percent stake] of Vinaconex. The transaction helped bring 701.9 billion dong ($40.1 million) to VCG. Both partners also completed establishing of Vinaconex-Viettel Finance Joint Stock Co.

In 2010, the military run telecommunications group said it aims to participate in buyback or capital contribution contribute capital into the telecom networks of markets of Asia, Africa and America Latin with the determination to carry out two major business deals: acquiring 60 percent stake in Teletalk mobile network of Bangladesh with a capital of about $300 million and taking 70 percent stake in Haiti’s national telephone company, Teleco.

According to Viettel, the recent financial crisis t led to the value of telecommunication companies cheaper 2-4 times than earlier. And this was the opportunity for the group to penetrate the international market.

However, these companies actively buying other businesses in Vietnam mainly are new private enterprises that have been emerging in recent years. Last year the whole market expected to see the big transactions embedded with the negotiations of selecting strategic partners of Vietcombank and Vietinbank or equitisation of MobiFone, but till now all is not on progress.

Dang Xuan Minh, deputy general director of Avalue Vietnam said that the market this year could witness some remarkable business deals. For example, Japan’s Sapppore Breweries will buy 65 percent stake of Kronenbourg Vietnam (KVL)-a 50-50 joint venture between Denmark based Carlsberg Brewery and Vietnam’s Vinataba-with a price of $25.35 million.

Accordingly, Carlsberg with its 50 percent stake and another 15 percent of Vinataba in KVL will be transferred to Sapporo. After deal, Vinataba’s holding in KVL will be cut down to 35 percent. Up to this time, the negotiation has been finished. Finally when all procedures are completed, KVL will be changed name to Sapporo Vietnam. Meanwhile, Carlsberg confirmed it would receive the support of Thua Thien Hue provincial People’s Committee in buying back another 50 percent stake of the committee in Hue Bear Co (owner of Huda brand name) following the previous 50 percent purchase in 1995.

Other, Vinaconex (VCG) speeded up the selling of capital in its Cam Pha cement project in Ba Ria Vung Tau province for upgrading the company’s capital structure and financial strength.
In addition, some other deals have been instigated from 2009 end till now; typically the merger of Vietnam Seafood Corp, Quang Ninh province’s Ha Long Seafood Corp and Can Tho based Bien Dong Seafood Co.

Pursuant to regulations of State Bank of Vietnam, till the end of 2010, commercial banks must have minimum charter capital of three trillion dong, which urged domestic credit institutions to boost stock trades to raise capital. M&as in banking finance this year is forecasted to be much overheated in the upcoming time.
Laodong

Tags: Vietnam M&A