Vietnam - a magnet for M&A deals

Vietnam has become a favoured destination for merger and acquisition (M&A) deals for foreign investors, particularly those from the Republic of Korea (RoK), China’s Hong Kong, Singapore and Japan as the Asian multinationals see the benefits of having presence in one of the region’s fastest-growing economies.

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RoK investors have overwhelmed M&A deals in the Southeast Asian country, the Vietnam M&A Forum (MAF)’s M&A report showed.

Conglomerate SK Group signed a billion dollar deal with Vingroup, in May to acquire 154.3 million primary shares in Vingroup and 51.4 million shares of the firm’s Vincommerce for 1 billion USD. After the transaction, SK would own a 6 percent stake and become a strategic partner of the Vietnamese real estate, tech, retail and services giant.

The company also expressed its interest to purchase additional shares of the PetroVietnam Oil Corporation (PVOIL) after buying 3.55 million shares at the firm in 2018.

Furthermore, Shinhan Card bought Prudential Vietnam Finance Company Limited at 151 million USD, while Samsung SDS has pledged purchasing 25 percent stake of CMC, Vietnam’s leading information technology service provider.

According to the Korea Financial Investment Association (KOFIA), the Korean funds poured some 3.5 billion USD in Vietnam as of May, or 13 times higher than four years ago.

Meanwhile, Hong Kong is a noticeable investor in the first half as it landed 5.3 billion USD in Vietnam. 

Particularly, Hong Kong’s Beerco Limited spent 3.85 billion USD on acquiring stake in Vietnam Beverage Co., Ltd, a local unit of Thai Beverage Public Co., Ltd. 
Besides, Hong Kong investors also injected a large amount of capital into various projects in the country.

The Hong Kong and Shanghai Banking Corporation (HSBC) said Vietnam has benefited a lot from the escalating US-China trade war as well as the ASEAN-Hong Kong free trade agreement, which takes effect from June 11, 2019.

Hong Kong investors are seeking investment in the Southeast Asian country amid the US-China trade tension, said CEO of HSBC Bank Vietnam Ltd Pham Hong Hai, adding stable bilateral cooperative ties coupled with implementation of the fresh agreement promise to open new opportunities for collaboration in the coming time.

As for Singaporean investors, they are the third largest acquirers of M&A in Vietnam with the deals totaling 1.6 billion USD during 2018-2019. 

The Singaporean Government’s GIC Private Limited invested 1.3 billion USD to buy shares and provide debt instruments for Vingroup’s Vinhomes in April. Last year, the fund acquired 51.9 million shares at Masan Corporation at the value of 196 million USD.

Other renowned businesses in Singapore like Keppel Land, CapitaLand and Mapletree have involved in a line-up of M&A deals in Vietnamese real estate market.

Particularly, Singapore has already invested in 18 out of 21 sectors in Vietnam, with the processing-manufacturing cluster attracting 20.17 billion USD in 574 projects, or 40 percent of the total registered capital.

Vietnam has been an attractive destination for production firms in Asia, and this is a good opportunity for Singaporean businesses, especially those operating in electronics, garment and textile, food production, automation and logistics, said President of the Singapore Manufacturing Federation Douglas Foo.

Vietnam’s M&A market has also welcomed a strong wave of Japanese capital, with Creed Group, Mitsubishi, Sanyo Homes, Daiwa House Group and Sumitomo continuing M&A deals with Vietnamese property firms.

In addition, Mitsui & Co reached agreement with Minh Phu JSC to buy 35.1 percent stake at the firm while Taisho spent some 147.8 million USD acquiring 67 percent stake at Hau Giang Pharmaceutical JSC.

As the population will soon reach 100 million people, with the proportion of young and middle class expanding, Vietnam will be more attractive to foreign investors, experts said. 

In 2019 and the next couple of months, M&A deals with foreign players will be in the fields of consumer goods, retail sale, real estate, telecommunications, energy, infrastructure, pharmaceuticals, and education.

“We believe that Asian investors, like those from the RoK, Japan, Singapore and Thailand will hold the lion’s share in total M&A deals in Vietnam while the market is witnessing investment flow from Hong Kong. We expects for larger M&A deals, especially divestment at state-owned companies,” said Director of the AVM Vietnam Company Dang Xuan Minh, who is also head of the MAF’s research team.

Meanwhile, Professor Nguyen Mai, President of the Vietnam’s Association of Foreign Invested Enterprises, said “M&A deals will play increasing roles in Vietnam’s FDI attraction. This means we have ‘goods’ to offer, our firms are strong enough to carry out M&A deals with foreigners, and our business climate is really alluring to foreign investors”.
VNA

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