M&A boom reshaping business futures

Many listed companies have wrapped up deals to buy other companies or proposed mergers to their boards. The boom in mergers and acquisitions (M&A) by listed companies.

More and more listed companies to make M&A

On April 28, SaigonTel (SGT) shareholders approved plans to merge with Kinh Bac Urban Development Corporation (KBC). One day before, KBC also approved the merger. Reports submitted to the shareholders showed that the two companies are members of Saigon Investment Group, and the merger will benefit both by creating a legal entity with larger operations, a bigger market share and higher assets.

KBC has good experience in industrial real estate, trade centres and hotel development. SGT has advantages in Internet service and telecommunications equipment, both of which can assist KBC’s operation. Additionally, KBC’s main field of operation is in the north, while SGT’s is in the south, so this will expand their scope.

According to Hoang Sy Hoa, Deputy General Director of SGT, the two companies are choosing consultants who can build detailed merger plans to offer shareholders.

After a lot of delays, the shareholders’ meeting of Kinh Do Mien Bac Food Processing Company (NKD) gathered late last week to discuss merging into Kinh Do Company (KDC). The shareholders’ meeting of KDC will vote on the merger of NKD and Kido’s Ice into KDC.

Dau Tu Chung Khoan quoted Luong Quang Hien, Deputy General Director of KDC, as saying that the aim of the merger of NKD into KDC is to avoid overlapping competition once KDC moves north, while NKD plans to conquer the southern market.

Prior, many successful M&A deals transpired, including the merger of Ha Tien 2 (HT2) Cement Company into Ha Tien 1 (HT1) Cement Company and the merger of Miraa Fiber (KMF) into Miraa (KMR).

Besides these mergers, Vietnam’s stock market has also witnessed companies purchasing others. Hung Vuong Seafood Company (HVG) purchased 3.75 million shares of Agifish (AGF), turning AGF into a subsidiary of HVG. Phu Nhuan Jewelry Company purchased 26 percent of Saigon Fuel Company (SFC), raising its proportion in SFC to 49 percent.

With these purchases, companies can “swallow” other companies without creating new legal entities.

After two years of economic crisis, many businesses believe now is the time to restructure and find their optimal operation scale. They rely on M&A as part of the restructuring process.

For instance, HVG owns 51.08 percent of AGF stakes, so the company can use AGF’s modern factories. In turn, AGF can obtain materials, export markets and management experience from HVG, Vietnam’s leading tra and basa exporter.

AGF has reaped benefits too: in the first quarter of 2010, AGF obtained 12 billion dong in post-tax profit, much higher than the 1.56 billion dong it obtained in the same period of 2009.

According to Dinh Quang Hoan, Corporate Consultancy Director of Ban Viet Securities Company, businesses understand the benefits, but M&A deals have only enjoyed a boom recently because complex procedures were simplified.

Dau tu chung khoan

Tags: Vietnam M&A, vietnam stock, Vietnam stock market