Japanese investors won’t shy from possible M&As

In the first three months of 2023, there were five merger and acquisition (M&A) deals involving Japanese investors in Vietnam. Could you share more about these deals?

Masataka “Sam” Yoshida, head of the Cross-border Division of RECOF Corporation

Five major Japanese companies made investments in Vietnamese companies in the financial and consumer goods sectors during the first quarter. The most notable investment was made by Sumitomo Mitsui Financial Group (SMFG), which has invested in 15 per cent of VPBank. SMFG aims to enhance its growth strategy in Vietnam by leveraging VPBank’s extensive branch network across the country in various areas, including retail and small and medium-sized enterprise finance.

Meanwhile, Dairei, a frozen seafood processing company, acquired a stake in TBM Consumer, a subsidiary of REI, a Vietnamese company in frozen seafood processing and sales. Dairei will hold an exclusive distribution agreement with REI for shrimp and other products in Japan, where it supplies restaurants and other customers. Dairei also plans to expand its overseas sales business by selling its products in Vietnam.

In addition, Morinaga Milk acquired Morinaga Le May, an infant formula importer and retailer. Morinaga began exporting infant formula through Le May in 2010. With this acquisition, Moringa aims to strengthen the business development of Morinaga-branded infant formulas.

Kato Sangyo, a food wholesale company, has taken over Nam Khai Phu Service Trading Production, a Vietnamese food wholesaler, by scooping up all shares from existing shareholders. Kato is focused on developing and expanding its food distribution business in Asia, aiming to strengthen its food distribution channels and expanding its product portfolio.

Lastly, Lion, a household goods manufacturer, scooped up a stake in Merap, a pharmaceutical/medical device manufacturing and sales company. Lion aims to leverage the group’s product development and production technology capabilities to expand its business in the Vietnamese market.

The deal value of Japanese M&As in Vietnam in the first quarter of 2023 has surpassed the total value in 2022. What are the reasons behind this increase?

The reason is mainly due to a $1.5 billion investment of SMFG in VPBank, in which the company aims to bolster its growth strategy in Vietnam with a particular focus on expanding its presence in the retail sector. This follows its significant investment in FE Credit in 2021, which further underscores its dedication to business development in Vietnam.

We see that Japanese M&A activities are gradually warming up again in Vietnam, and the economic fundamentals of the Japanese domestic market have been relatively stable, which is a supporting factor for their overseas investments.

Many Vietnamese companies are selling their assets amid market turbulence. Are Japanese investors eager to buy Vietnamese companies on the cheap?

Japanese investments in Vietnamese companies are strategically oriented by nature, indicating that they do not especially seek to acquire companies at low prices. Instead, the pricing tends to be fair and to reflect the real value and potential of the target companies.

Also, Japanese investors tend to invest in target companies with good quality, rather than pick up companies financially in trouble but at attractive prices.

What is the outlook for Japanese investors in the market, and do you expect any mega deals this year?

The size of deals depends on the availability of suitable targets and, as said previously, most Japanese investments are strategically oriented, so it will depend on the availability of targets with a good strategic fit, whatever the size is. The emergence of any mega deals is not specifically guaranteed.

On the other hand, the number of transactions is likely to increase steadily, especially for catching up the strategic time gap left over from inactivity during the pandemic in the recent years. Given the huge cash amount reserves in Japanese corporates, it will not stop them executing mega deals when and if such big targets become available.

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