Garment firms seek a good fit

Garment firms are showing a growing appetite for stitching up expansion deals through acquisitions.

The Vietnam National Textile Garment Group (Vinatex) said this year had seen some of its members enlarging their business scope by buying out under-performing businesses operating in the same field.

To cite just one example, the Hung Yen Garment Corporation JSC recently spent over VND20.6 billion ($995,000) on South Korean-backed Gunyong Garment Joint Stock Company.

“The buyout will help us quickly expand production and push up exports,” said the firm’s general director and chairman Nguyen Xuan Duong.

“Gunyong Garment’s 15,000 square metres with its 4,000sqm workshop area and eight production lines is a big advantage to us, especially given the acquired firm is also based in Hung Yen province,” Duong added.

After taking over Gunyong Garment, Hung Yen Garment’s leadership quickly restructured the acquired firm’s organisational, production and management systems so the firm can resume operations shortly.

The acquired firm currently employs 150 people with monthly incomes averaging VND3.8–4 million ($183-$193).

“As the production space is generous, in 2012 Hung Yen Garment will pump another VND40 billion ($1.93 million) into expanding business and create jobs for over 1,500 labourers as well as hiking production and exports,” said Duong.

A 12,000sqm, three-storey production factory with 24 garment lines will be set up and is slated to come online in the third quarter of 2012.

In a similar development, Vinatex bought out central Quang Ngai province-based Dai Cat Tuong Garment Company in early July 2011 at a cost of approximately VND40 billion ($1.93 million).

The acquired firm, founded in March 2005 with VND38 billion ($1.83 million) in total investment, employed around 1,300 labourers in its heyday. But the firm posted only losses from 2008 onwards and could not pay the labourers, making a slew of workers quit their jobs. The firm reportedly owed the employees VND1.6 billion ($773,000) in wages.

Since finalising buyout procedures, Vinatex has injected money into purchasing cutting-edge equipment and upgraded workspace with a view to providing jobs to around 3,000 workers. With over VND50 billion ($2.4 million) in total investment, the new factory will come online in 2012.

“In the face of a bleak economy and spiralling inflation, Vinatex has to delay some capital intensive textile dyeing projects with less than 20 per cent return-on-equity rate to prioritise less costly garment projects. We are also particularly interested in acquiring under-performing firms to boost production,” said Vinatex’s deputy general director Le Tien Truong. – VIR

Tags: Vietnam garment exports, Vietnam Garment industry