Vietnamese buyers cross the ocean for M&A transactions

May 06, 2021 | 08:00
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A recent significant jump in Vietnam’s investment abroad, raising direct funds, and mergers and acquisitions are slated to help local companies quench the thirst for high-quality capital, improving their international status, and expanding their customer bases.

Vietnam’s overseas companies have been gaining momentum in moving international capital, investing across a broad spectrum of sectors ranging from natural resources and manufacturing to telecommunications and many others.

Fresh data from the Ministry of Planning and Investment (MPI) reveals that in the first four months of 2021, Vietnam’s total newly- and additionally-granted overseas investment capital reached $545.9 million, up nearly eight-fold on-year.

Some 18 projects were granted new investment registration certificates, with the total registered capital of $142.8 million, an increase of 2.7 times on-year. Furthermore, there were nine projects with adjusted investment capital of $403.2 million, up 25.5 times on-year.

The country’s largest dairy producer Vinamilk was in February granted a certificate of offshore investment by the MPI to establish a joint venture in the Philippines with the initial fund of $6 million.

Vinamilk and its partner will hold 50 per cent of the joint venture which will import and distribute the group’s dairy products in the Philippines market.

The company has reported stellar financials in recent times thanks to the upbeat performance of its overseas subsidiaries. Angkormilk enjoyed a 20-per-cent increase in 2020, while its joint venture with Kido Food, Vibev, is capitalising on Vinamilk’s export network of 30 countries and territories.

1542 p5 vietnamese buyers cross the ocean for ma transactions

Leading the way

In another case, Military Bank (MB), one of Vietnam’s major lenders, is leveraging its tremendous potential and financial might to increase its foothold in the Southeast Asian market, especially Cambodia, where last month it converted its branch into a wholly-owned bank.

In addition, MB plans to transfer 36-49 per cent of its subsidiary’s charter capital to a foreign strategic partner. The bank believes that its customers will benefit as they are well-served by a professional multinational financial group with a wide range of services, especially in money transfer, investment activities, and supporting cross-border business transactions.

“We firmly believe that the establishment of MB’s subsidiary in Cambodia will significantly increase the bank’s footprint there, as well as enhance our financial capacity,” said CEO Luu Trung Thai.

“The banking arm will lay a concrete foundation for us to explore vast potential of the Cambodian market, especially in the insurance and securities sectors. Along with IT infrastructure and digital banking services, MB is ramping up efforts to become the leading digital bank in Cambodia by 2025 and be among the top lenders in the micro finance sector of this country,” Thai added.

When it comes to telecommunications in Laos, people often think of Unitel – a Star Telecom brand, which is a joint venture between Viettel Group and a Lao company. Unitel now garners more than 3.3 million subscribers, and accounts for 56 per cent of the telecoms market share in Laos.

Viettel Global JSC – the overseas subsidiary of Viettel – has just announced its 2020 consolidated results with net revenue from operating activities of approximately VND19 trillion ($826 million) and pre-tax profit of approximately VND1.201 trillion ($52.2 million).

Viettel’s major growth driver is its solid business in foreign markets, including significant contributions from Mytel in Myanmar and Natcom in Haiti.

Viettel Global is one of the most exemplary cases of Vietnamese business overseas, with its affiliates dominating their respective markets. Last year, the company earned VND9.14 trillion ($397.4 million) in revenue from Southeast Asia and VND3.2 trillion ($139.13 million) from Latin America, separately.

In February, Asian media was in a stir over the rumoured takeover deal between Vingroup and LG Electronics, the fourth-biggest “chaebol” in South Korea. Vingroup has emerged as the most potential bidder to acquire LG Electronics’ smartphone production line as an important milestone for the Vietnamese group to penetrate the United States. However, LG Electronics’ discussions to sell its mobile phone factories to Vingroup fell through as the Vietnamese leading private conglomerate’s bid did not match expectations.

Satisfying the rules

On the same note, last month, VinFast - the automobile arm of Vingroup - and Bamboo Airways revealed fundraising activity plans that involved possible listing on the New York Stock Exchange.

According to Bloomberg, VinFast could be valued at around $50 billion after a successful initial public offering (IPO), while Bamboo Airways aims to raise up to $200 million in an overseas IPO in the third quarter of this year. The FLC Group airline subsidiary expects to secure market capitalisation of up to $4 billion.

On the other hand, challenges still colour the landscape, because not all Vietnamese corporations can satisfy the strict regulations of international stock exchanges.

Kent Wong, partner and head of Capital Markets at VCI Legal, shared some of the issues which could pose challenges for a Vietnamese company hoping to attain an IPO overseas. “Overseas exchanges require a high level of transparency, corporate governance, and strong internal controls, and most Vietnamese companies are not ready for this,” Wong told VIR.

Furthermore, the lack of resources to ensure regulatory compliance with rules and regulations after listing on the overseas stock exchange is also a major issue hampering the IPO process. “Compliance with the overseas exchange rules would mean the disclosure of information which materially affects the company’s share price, and including internal company information, such as the appointment of officers, acquisition of assets, winding up or judicial proceedings,” he added.

According to the Ministry of Planning and Investment, in the first four months of 2021, Vietnamese companies have shown their interest in outward investment in 10 sectors.

Science and high technology took the lead with eight new projects and two adjusted ventures, with the total newly- and additionally-registered investment capital of $270.8 million, accounting for 19.6 per cent of the total investment. Wholesale and retail ranked second, with the total investment capital of $147.8 million and making up 27.1 per cent. Following were agro-forestry-fisheries; administrative activities; and support services.

There were 15 countries and territories receiving investment from Vietnam. The United States was the leading nation, with two new investment and two capital adjustment projects, with the total registered investment capital of $302.3 million, accounting for 55.4 per cent of the total investment. Cambodia came second with the investment capital of $89.1 million, making up 16.3 per cent of the total. Followed were France, Canada, Germany, and the Netherlands, with the total investment capital reaching $32 million.

As of April 20, Vietnam had over 1,400 valid offshore investment projects with the total investment capital of $21.8 billion. Mining projects made up for 36 per cent of the total, while agro-forestry-fisheries accounted for 15.4 per cent. Laos, Cambodia, and Russia were the most popular investment destinations from Vietnam, with 23.1 per cent, 13 per cent, and 12.7 per cent respectively.

By Nhat Minh

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