M&A builds up steam in finance sector

Thailand’s prominent financial institutions, Kasikornbank Pcl (KBank) and SCB X Pcl, are reportedly in the final stages of bidding for Home Credit’s consumer finance operations in Vietnam, according to a last week’s report by Bloomberg.

Some lenders have been whittling down their options for several months, Source: Shutterstock

Joining them is KB Kookmin Bank, part of South Korea’s KB Financial Group, also advancing to the next round of the bidding process.

The assets in question are estimated to be valued at around $700 million. Home Credit is aiming to finalise the sale of its Vietnamese arm by the end of the year, although negotiations are ongoing. The bidders retain the option to withdraw their offers, and Home Credit may opt to retain its assets beyond the proposed timeline.

In August, KBank announced ambitious plans to invest over $1 billion in Vietnam, targeting 8.4 million users by 2027. This strategic move was revealed by KBank’s chairman, Pipit Aneaknithi, signalling the bank’s commitment to significantly expand its operations in the Vietnamese market.

“Most of this investment, amounting to $735 million, will be directed towards banking operations,” Aneaknithi said. “The remaining funds will be allocated to our two subsidiaries in Vietnam - KVision, our investment fund, receiving $336 million, and KBTG, our technology company, receiving $7 million.”

Currently, KBank operates a representative office in Hanoi, and since 2021, the KBank Ho Chi Minh City branch has been functional with an initial capital of $80 million. “In May this year, we increased the branch’s capital to $285 million, making it the second-largest foreign bank branch in Vietnam by capital,” added Aneaknithi.

Meanwhile, a consortium of investment funds under Dragon Capital announced the acquisition of an additional four million shares in Sacombank on November 6.

Specifically, CTBC Vietnam Equity Fund purchased three million shares and Vietnam Enterprise Investments acquired an additional one million shares. This transaction elevates Dragon Capital’s total holding in Sacombank to 114.08 million shares, corresponding to a 6.05 per cent stake in the bank’s charter capital.

“The acquisition aligns with our strategic investment objectives in Vietnam’s banking sector, reinforcing our confidence in Sacombank’s potential for growth,” a representative from Dragon Capital said.

Elsewhere, SeABank and AEON Financial Service Co., Ltd., last week concluded a landmark deal in Vietnam’s consumer finance sector with SeABank transferring its entire stake in Posts and Telecommunications Finance for around $176.6 million (see Page 23).

In July, SeABank also sold nearly 95 million shares, a 4.63 per cent stake, to the Norwegian Investment Fund. To date, SeABank is one of few lenders in Vietnam that does not have a strategic foreign investor.

For months, SHB has reportedly been in the final stages of negotiations to sell a 20 per cent stake to foreign investors. The potential deal, involving investors from South Korea and Japan, values the Vietnamese bank at approximately $2-2.2 billion.

Furthermore, SHB in May successfully divested a 50 per cent stake in its subsidiary SHB Finance to Krungsr, another Thai bank. A further transfer of the remaining stake is slated for the next three years, reinforcing SHB’s commitment to its long-term partnership strategy.

Another lender, LPBank, is also advancing its plan to issue 300 million shares to foreign investors this year, pending regulatory approval. This private issuance is part of LPBank’s initiative to strengthen its capital base and expand its investor base.

“With these strategic share issuances, we are bolstering our financial foundation and fostering lasting partnerships with foreign investors,” stated an LPBank representative.

State-owned banks are not far behind in leveraging foreign investment opportunities. BIDV has long planned a private issuance of 9 per cent of its shares to foreign investors, but the process has faced challenges.

In May’s AGM, BIDV chairman Phan Duc Tu said, “We’ve engaged with 38 potential investors over the past three years. However, global economic uncertainties, shrinking risk appetite for emerging markets, and tightening monetary policies globally have impeded our efforts. We remain committed to fulfilling this objective in 2023, with some promising investors in sight, though details cannot be disclosed currently.”

Vietcombank, which is another state-owned bank, is cautiously moving forward with its plan to issue 6.5 per cent of its shares to foreign investors.

“We are currently in the consultancy phase and aim to execute the issuance in the 2023-2024 timeframe, aligning with our strategic goals and market conditions,” said Vietcombank chairman Pham Quang Dung.

Huong Trinh, partner at BDA Partners, believes that even though the total deal volume in 2023 might be impacted, the average transaction value based on recent transactions has increased significantly. The healthy deal flow emphasises investor confidence in the market’s long-term growth potential.

“Foreign investors, despite the market’s weakening performance in 2023, continue to source and monitor the investment opportunities in Vietnam,” she said. “There is a long-term view that Vietnam is one of the most attractive markets for investment in Southeast Asia thanks to its favourable demographics, resilience, as well as government efforts in improving the investment environment.”

Vietnam retaining potential for M&A transactions Ahead of the Global M&A Partners (GMAP) conference this week, co-chairmen Ivan Alver and Frédéric de Boer shared their views on the role of the Vietnamese market in GMAP’s development strategy with VIR’s Bich Ngoc.

M&A showcase seeks to invite more professional investment Consulting company RECOF Vietnam is hosting the Global M&A Partners (GMAP) conference on November 13 in Ho Chi Minh City.