Foreign investors buying up local businesses

June 02, 2023 | 12:30
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As they struggle with the growing burden, numerous businesses are offering to sell almost all of their properties and other assets.
Time for foreign investors to go buying local businesses
Egroup's chairman Nguyen Ngoc Thuy has purchased Apax Holdings' bonds

At a recent meeting with the National Assembly Standing Committee on the socioeconomic situation, Minister of Planning and Investment Nguyen Chi Dung said that increasing numbers of local enterprises have sold their properties to foreign businesses.

The selling of assets and properties, or even entire businesses, has been common over the past year or two, with more businesses falling into difficulties and lacking capital. At the beginning of March, for example, the owner of the Dolce by Wyndham Hanoi Golden Lake Hotel in the heart of Hanoi put the hotel on the market at a starting price of $250 million.

Nguyen Huu Duong, chairman of the hotel owner Hoa Binh Co., Ltd., said that the company's social housing project had not been granted construction permits, meaning a lack of cash flow and the need to sell off assets to ensure liquidity.

“Many of the partners negotiating to buy our hotel are businessmen from China, India, and the United Arab Emirates,” said Duong.

Hundreds of large and small hotels in Vietnam’s biggest cities have been put up for sale in the last two years because the investors did not have enough money for renovations after the pandemic closures, and revenues since then cannot cover the costs due to the reduction in customers.

In March, Egroup Education announced that 75 land plots in Thanh Hoa province, each around 100-200 square metres, are selling at the same price of VND300 million ($13,000) per plot.

Egroup owns many education, training, healthcare, and food facilities, including the Apax Leaders chain, Igarten kindergartens, and the Firbank Australia interschool. In 2022, Egroup chairman Nguyen Ngoc Thuy admitted that the Egroup ecosystem was struggling in terms of cash flows due to the closure of the educational systems during the 2020-2022 period.

While some deals are being made by local individuals and enterprises, most recently acquired large-value assets now belong to foreign investors.

In 2022, Gamuda Land Vietnam successfully acquired the Artisan Park project in Binh Duong New City from TDC, with the deal worth up to $54 million.

Soon after that, Gamuda Land merged with a domestic company to own Elysian, a high-rise apartment complex in Ho Chi Minh City. The 3-hectare project includes 1,300 flats with a gross development value estimated at over $250 million.

In mid-March, Reuters also reported that CapitaLand Group might be negotiating with a local real estate giant to buy a project in the north of Haiphong with a value of about $1.5 billion. A representative of CapitaLand Group said that Vietnam is one of its core markets and the company is continuously considering investment opportunities to develop its presence in the country.

Additionally, there have been a series of debt sales in the real estate sector and at banks since the pandemic. Many business owners have had to sell homes, cars, and even watches to generate the money to pay employee wages and maintain the operations of their companies.

Ly Kim Chi, chairman of the Food and Foodstuff Association of Ho Chi Minh City, said that since the beginning of 2023, the profit margin has been extremely low due to high-interest rates and increasing input costs.

“With the current lending interest rate of over 10 per cent per year, it is very stressful to survive and maintain operations. Therefore, a few large enterprises in the industry with decades of experience have sold up or are working with foreign enterprises and investment funds,” said Chi.

Economist Nguyen Thuong Lang from the Institute of International Trade and Economics said that the sale of an enterprise's assets is a normal occurrence in the economy. However, selling assets for only half of the real value is alarming.

“There are many reasons for this. Business and capital costs are too large, loan interest rates at banks are too high, production is sluggish, there are backlogs and no cash flow, debts are due, and the list goes on,” Lang said.

Some enterprises in the wood export industry said that if they did not sell their assets to save themselves, the companies would go bankrupt and 600 workers would become unemployed.

“In a market economy, we lose money and property if we fail. But it is not easy to develop strong local enterprises today, and it is sad for many of them to have to sell to foreign businesses,” added Lang.

Consultant Do Hoa said that the country’s product brands could lose out.

“Vietnamese goods suffer the most. Therefore, instead of allowing large corporations and enterprises to gradually sell their assets, they could restructure. If some segments are still good, they can be isolated independently, or transferred to other capable Vietnamese corporations for continued management,” said Hoa.

“By doing so, many business segments of that enterprise can still continue to operate under the name of a Vietnamese enterprise and the tangible and intangible property remains Vietnamese. The government should intervene to protect the interests of the country, especially large corporations,” Hoa concluded.

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By Nguyen Huong

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