Despite Covid-19 pandemic, M&A deals increase

SGGP
Several merger and acquisition (M&A) deals have been completed although the global economy is stumbling because of the Covid-19 pandemic. Of which, some Vietnamese brand names have fallen into the hands of large foreign corporations.

 Thinh Phat Cables Joint Stock Company officially merged into Stark Corporation Public Company Limited and Phelps Dodge International of Thailand. (Photo: SGGP)

Thinh Phat Cables Joint Stock Company officially merged into Stark Corporation Public Company Limited and Phelps Dodge International of Thailand. (Photo: SGGP)

Thinh Phat Cables Joint Stock Company (ThiPha Cable), one of the major electrical wire and cable manufacturers in the country, has officially merged into Stark Corporation Public Company Limited and Phelps Dodge International of Thailand. The deal with a total value of hundreds of millions of dollars is considered to be a shortcut for Thai investors to take advantage of the available resources of ThiPha Cable to exploit the Vietnamese market and the ASEAN region. Thinh Phat Cable JSC has continued to extend the list of Ho Chi Minh City-based business brands that fall into the hands or are under the control of foreign investors, besides Sabeco, electronics retailer Nguyen Kim, and Binh Minh Plastics.

Japan’s Haseko Corporation and Ecoba Vietnam Joint Stock Company recently announced a strategic cooperation agreement, in which the Japanese partner bought a 36 percent stake in Ecoba Vietnam. This capital contribution of Haseko Corporation did not surprise investors, because the large real estate investor of the ‘Land of the Rising Sun’ said that Vietnam is the most potential and attractive market in the ASEAN region in its foreign investment strategy. However, getting attention in the real estate sector is a group of investors led by KKR, including Temasek that has just completed a transaction to repurchase an investment in Vinhomes Joint Stock Company, a member of Vingroup. KKR investor group has invested over VND15 trillion, equivalent to about 6 percent stake of Vinhomes. Although just becoming a minority shareholder, KKR's prestige will contribute to increasing the value of Vinhomes shares.

In the consumer goods sector, Ardolis Investment Pte. Ltd. owned by GIC - an investment fund managed by the Singapore Government - has also announced that it has purchased 38,916,667 shares of Masan Group Joint Stock Company (MSN). Thus, after the transaction, GIC has increased its ownership in MSN from 9.7 percent to 13.03 percent.

The above events show that the trend of acquiring and merging in Vietnam by players from foreign countries has continued to grow. According to analysts, the acquisition of domestic enterprises can help investors quickly participate in the market and have opportunities to export to countries in the region. Therefore, the fields that foreign investors have been pouring capital into the domestic market are also quite diverse, namely retail, food production, fast-moving consumer goods, finance, real estate enterprises, and industrial production. These fields are strongly attracting the M&A activities of foreign investors.

The situation shows that foreign investors in Vietnam tend to increase investment through M&A. According to the Ministry of Planning and Investment, in the first five months of this year, there were 3,528 times of capital contribution and purchase of shares of domestic enterprises by foreign investors, up 11.6 percent over the same period last year. Meanwhile, in the same period, only 1,212 foreign direct investment (FDI) projects were granted investment registration certificates, down by more than 10 percent compared to the same period last year.

However, the above trading results are only the tip of an iceberg, approved by the stock market. Because, in reality, there were still many undisclosed deals. M&A activities are always kept confidential, very few transactions are announced, except for foreign enterprises listed on the stock market that are required to disclose information. Noticeably, in the context that the Covid-19 pandemic has caused many small-scale enterprises with poor resistance to sell themselves. And if under normal business conditions, it is difficult for foreign investors to buy stocks at low prices, or even at high prices, because enterprises do not sell their shares. But the situation is different, investors with financial potential can now buy both low-priced and corporate stocks that they could not buy in the past.

It is no coincidence that at the online conference between the Prime Minister and enterprises on May 9, the Minister of Planning and Investment Nguyen Chi Dung said that shortly, the merger and acquisition phenomenon will take place more strongly and there is a high risk that more potential Vietnamese firms might be acquired at low prices. The Vietnam Chamber of Commerce and Industry (VCCI) has also sent recommendations and proposed solutions to the Government with the desire to remove difficulties for enterprises, in which the Government was proposed to temporarily stop the buying and selling and merger of enterprises during the pandemic, to restrain foreign enterprises from acquiring Vietnamese enterprises. However, this proposal of the representative of VCCI faced many mixed opinions, because of the lack of legal basis to suspend current M&A activities. On the other hand, in the difficult situation caused by the Covid-19 pandemic, many enterprises in a difficult situation will need to call for investment capital or external support to save them. Therefore, it is impossible to deprive their rights in this difficult situation. According to lawyer Truong Thanh Duc from Basico Law Firm, there will be a lack of legal basis to suspend the current M&A activities. M & A is the action of the enterprise, moreover, it saves the acquired company from the tight spot. 

‘We do not know what the benefits are if stopping M&A transactions, meanwhile, struggling businesses will not know where to raise capital, leading to paralysis and possibly even bankruptcy,’ Mr. Duc said.

Not only Vietnam but some countries in the world also concern that foreign investors take advantage of plunging stocks and the volatile market due to Covid-19 to acquire firms at low prices. Some countries such as Germany and Japan, the government has introduced measures to prevent the risk of businesses being acquired in times of economic crisis, to protect important economic sectors and important enterprises or enterprises related to national security.

By Xuan Loc – Translated by Bao Nghi

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