Saturday, February 11, 2012

2.67 billion dollars and the time of M&A


Most of the successful M&A deals were the ones with the involvement of foreign investors, with the cash flow mostly coming from Japan. Consumer goods, finance and real estate were the business fields which witnessed the M&A deals with the highest values.

Foreign investors were the main buyers

The value of the affairs where foreign investors were the buyers accounted for 81.3 percent of the total value of 2.67 billion dollars.

Chinese Pokphand purchased 70.8 percent of CP Vietnam’s stakes, an animal husbandry company. Russian VinpelCom bought more stakes to increase its ownership ratio in the Gtel-Mobile joint venture to 49 percent. IFC bought 10 percent of Vietinbank’s stakes. These were the three biggest deals in 2011.

Japanese investors were the biggest foreign buyers in the M&A deals. Japanese spent 236 million dollars to buy stakes in Vietnamese companies, including 25 million dollars in the SBI – FPTS deal, 6.9 million dollar in Nikko Cordial – PSI. Japan Asia Vietnam bought Center Point building in HCM City. Unicharm bought the whole Diana Vietnam at 128 million dollars.

A noteworthy thing in the M&A transactions in 2011 was the withdrawal of capital by investment funds. Vietnam Opportunity Fund (VOF), for example, sold 24.9 percent of Halico’s shares to Diageo and sold 24 percent of Hoan My group’s stakes to Indian Fortis. Dragon Capital sold 6.6 percent of Sacombank’s stakes after 10 years of investing in the bank.

The capital withdrawal of investment funds that paves the way for successful M&A deals is believed to continue in 2012 and the next years, when the investment funds expire after five years of operation in Vietnam. With the decision on allowing to shift close funds into open funds, the capital withdrawal would go more easily.

Consumer goods manufacturers, banks, real estate firms targeted

The companies in the business fields of consumer goods, banking and real estate were very much in demand. The M&A deals in consumer goods manufacturing had the total value of one billion dollars, while the deals in the finance and banking, including IFC/Vietinbank, IFC/An Binh Bank; LienVietBank/VPSC; PVI/Tanlax (banking), and SBI/FPTS, Nikko Cordial/PSI, Xuan Thanh Group/Vincom Securities, MaritimeBank/Standard Securities, KIS/EPS Securities, CitiGroup/Horizon Securities (securities) in 2011 made the market bustling.

Regarding the real estate sector, it is estimated that the total value of the M&A deals in the sector reached 250 million dollars. However, analysts believe that many other successful deals were not announced.

M&A - the opportunity to restructure businesses

A lot of Vietnamese enterprises restructured their business with M&A deals. These include FPT Trading, FPT Software and FPT FIS which made share swapping to become the subsidiaries of FPT. Hapaco group issued 1.5 million shares to swap shares of small shareholders at Hapaco Hai Au (GHA) and Hapaco yen Son (YSC), then canceled the listing of the two shares on the Hanoi Exchange. Vinpearl Corp issued 25.6 million shares to swap for the shares of three associated companies, namely Vinpearl Da Nang, Vinpearl Hoi An and Vincharm.

Especially, in the fourth quarter of 2011, the market witnessed the biggest M&A deal – the merger of Vincom and Vinpearl, which is considered a typical horizontal merger deal between two Vietnamese companies, aiming to expand the business scale and diversify business fields.

With the big business scale of the companies, both are listed companies with shares traded on the bourses and the share prices fluctuating every day, it was really very difficult to conduct the merger. The chosen M&A method was swapping shares. Vincom issued more shares to swap for Vinpearl’s shares from shareholders. After that, Vincom would possess 100 percent of Vinpearl’s chartered capital and turn the companies into one-member limited companies.