The first three months of the year have witnessed more local businesses beef up their mergers and acquisitions efforts in order to scale up operations.
In January, seafood processing company Vinh Hoan Corporation scooped up 51.29% stake in Sa Giang Import Export Corporation. The company spent nearly US$15.2 million buying 3.56 million shares from State Capital Investment Corporation which held Sa Giang’s stake.
Vinh Hoan is also preparing to purchase 25.43% of Sa Giang from four individual investors to raise its ownership to 76.72%. Sa Giang produces instant noodles and crackers made from crab and squid. The company exports its products to Europe, especially Germany and the Netherlands, as well as some Asian countries.
Meanwhile, GTNfoods, a subsidiary of Vinamilk, has approved the merger into Vietnam Livestock Corporation (Vilico). Following the merger, GTNfoods will cease existence, with all assets, rights, and obligations transferred to Vilico. Meanwhile, Vilico is oriented to become a major player in the field of breeding and processing meat products in Vietnam.
The deal also marks the completion of Vinamilk’s restructuring. At GTNfoods’ recent AGM, Vinamilk chairwoman Mai Kieu Lien said that the dairy group will not engage in any mergers and acquisitions (M&A) deals for the next 5-10 years.
Meanwhile, other local companies are still preparing plans to diversify their portfolios. At last week’s AGM, REE chairwoman and CEO Nguyen Thi Mai Thanh said that the board has seen enormous opportunities for M&A this year.
The company needs to set aside cash to purchase projects instead of relying on loans. Therefore, REE will not pay dividends to save capital for potential deals in electricity, water, and real estate this year.
In the same vein, Hau Giang Pharmaceutical Joint Stock Company’s Board of Directors predicts that M&A transactions in Vietnam’s pharmaceutical industry have become more vibrant as several international pharma brands have entered into partnership with local players.
In light of the official entry of the EU-Vietnam Free Trade Agreement, EU companies can make deeper penetration into the supply chain, production, and distribution in the Vietnamese market, fuelling a stronger wave of pharmaceutical M&A deals, and creating opportunities for local companies to increase competitiveness. At present, Japan’s Taisho Pharmaceutical Co., Ltd. currently holds 51.01% in Hau Giang Pharmaceutical.
Elsewhere, Dong Nai Plastic also acquired 18.76 million shares of brick producer CMC JSC, equivalent to 51.14% of the ownership. The acquisition of CMC is considered an important step in realising Dong Nai Plastic’s strategy to become the number one supplier of materials for civil and infrastructure construction works in Vietnam.
In another case, at the upcoming AGM on April 29, Transimex will submit a proposal about buying shares of seafood producers and exporters Special Aquatic Products JSC. Masan HighTech Material, a subsidiary of Masan, is seeking shareholders’ approval to raise its capital through a private stock offering to serve investment and M&A activities.
“Reflecting the global trend, the Vietnamese M&A landscape is likely to remain active this year,” said Ong Tiong Hooi, partner of transaction services at PwC Vietnam. “While the market has adopted a cautious approach so far, Vietnam’s M&A market is in a strong position for recovery as the country started 2021 with a positive economic outlook. Furthermore, the pent-up demand is likely to kick in as investor and consumer confidence increases in light of COVID-19 vaccine developments.”
Simon Kavanagh, partner and head of Industrials at BDA Partners said, “Vietnam is one of the most active M&A markets in Asia. Its favourable demographics, manufacturing and supply chain infrastructure, and economic and political stability make it particularly attractive to investors. Given the government’s successful control of the COVID-19 pandemic, we expect 2021 to be a record year for investment in Vietnam, and for industrial M&A deals in particular.”
Experts agree that the emergence of a local M&A market is a sign that local management teams are maturing in their abilities and consider different options to grow, with more local players seeing the attractive opportunities in Vietnam.
It is believed that successful M&A projects rely on smart decision-making and integration of the business acquired, so the pressure on management to successfully implement the deals is huge.