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NEWS UPDATES Asean Affairs        10   June 2011

Vietnam's busy year for M&A

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Corporate restructuring, private placement of shares, and the search for strategic partners will keep the Vietnamese mergers and acquisitions market busy this year and in 2012, experts told a forum held in HCM City yesterday.

Speaking at the Vietnam M&A Forum 2011 organised by the Vietnam Investment Review newspaper and business consultant AVM Vietnam, they pointed to the increasing interest in corporate restructuring by businesses and strategic stake sales by large State-owned firms like Vietcombank, MobiFone, and VinaSteel, saying these would be the driving forces for M&A activity.

Private companies like Vincom and FPT also have plans to restructure their affiliates.

To Hai, CEO of Viet Capital Securities Company, said M&A activities this year would be focused on core businesses to improve competitiveness rather than expansion. The main sectors would be entertainment and communication, education, healthcare, consumer goods and retail, banking, infrastructure, and real estate.

Mayooran Elalingam, head of M&A in South East Asia for Deutsche Bank, said there were hurdles in Viet Nam.

"The Vietnamese economy remains heavily reliant on industries such as farming and agriculture which do not lend themselves to foreign acquisitions."

Other sectors that are more attractive, like oil and gas, have very stringent foreign ownership restrictions that restrict M&A activity.

In public companies, there could be no major foreign stake while in banks, total foreign ownership could not exceed 30 per cent.

Restrictive regulations had limited the size and frequency of transactions while there were no specific regulations for M&A in the country yet.

Besides, many potential investors had turned cautious after inflation and interest rates reach all time highs.

However, the government continued to open up to foreign investment while there was a renewed push for the privatisation of state-owned enterprises, two key factors that would drive the M&A market.

Other drivers were the sustainable long-term economic growth that was forecast for the country and its expanding middle class.

Yet another was the weak domestic outlook in developed economies which forced companies to consider expanding into Asia, including Vietnam.

Last year 345 deals worth around US$1.7 billion were done in the country, up from 295 and $1.1 billion in 2009.

Of this, the consumer staples industry accounted for 25 per cent, followed by real estate and energy-power, both at 17 percent.

So far this year, deals worth $1.57 billion have been completed.

Thien Minh Group, a leading tourism and hospitality company with its core business in Viet Nam and Southeast Asia, has acquired five Victoria Hotels and Resorts from EEM Victoria Hong Kong.

The deal was completed in February at a cost of $45 million.

In April Japan's Daio Paper Corp and BridgeHead fund picked up a 38 per cent stake in the joint-stock Saigon Paper Corporation.

Other deals include the Philippines' Jollibee Foods Corp's acquisition of 49 per cent in the Highland Cafe chain for $25 million, and the US-based Kohlberg Kravis Robert investment group's purchase of 10 percent in the Massan Consumer Corp for $159 million.

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