Foreign investors make boom in acquisition of Vietnam’s companies

The Vietnamese market has recently seen a notably deal, in which Frasers Property acquired a 75 percent stake in Ho Chi Minh City-based Phu An Dien Real Estate JSC (PAD) for VND799 billion (US$34.3 million). Previously, the Singapore-based realty group also spent US$18 million to hold a 75 percent stake of Phu An Khang JSC.
In July, Vemanti Group, Inc., a technology-driven holding company, also entered a definitive agreement to take a 20 percent equity interest in eLoan JSC (eLoan), a Ho Chi Minh City-based fintech company. The deal’s value has yet to be disclosed.
As part of the agreement, Vemanti will execute a cash and stock exchange for a 20 percent equity interest in eLoan with options for further deals along with a corporate board seat.
The two deals were only among 3,311 transactions to contribute capital or buy shares in Vietnamese firms made by foreign investors so far this year, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.
Nguyen Noi, FIA’s deputy director, said that more and more foreign investors have chosen to contribute capital or buy shares of Vietnamese firms to invest in the Southeast Asian country so that they can immediately enter the market, instead of having to invest from the beginning in the construction of factories or business establishments.
According to Noi, among US$5.8 billion of the Vietnam’s M&A total value in 2016, the amount of capital contribution and share acquisition of foreign investors was US$4.5 billion. In 2017, the country’s M&A market was worth US$10.2 billion, of which the capital contribution and share acquisition of foreign investors also made up US$6.3 billion.
The same move was continuously seen in the first seven months of this year, with the capital contribution and share acquisition reaching US$4.79 billion, a year-on-year rise of 53.3 percent.
Reports from the Vietnam M&A Forum showed that Thailand led the race to buy stakes at Vietnamese companies last year. Thai investors have so far held stake at Vietnam’s leading companies such as BigC, Nguyen Kim, Prime Group, Binh Minh Plastics and Sabeco.
In the first seven months of this year, Singaporean investors also poured US$805 million in Vietnam’s companies. The figures for South Korean, Japanese and the British Virgin Islands investors were US$937.6 million, US$343.5 million and US$1 billion, respectively.
Rising trend forecast
Besides contributing to heating up Vietnam’s M&A market, the boom in the capital contribution and share acquisition of foreign investors in Vietnamese firms have also helped increase the country’s FDI inflow, Noi said, forecasting that this trend will continue to grow positively in the future.
According to Noi, the form of capital contribution and share acquisition when foreign investors invest in Vietnam is very useful because most of this capital will be immediately put into operation.
In addition, he said, making capital contribution and buying shares is also a form of joint venture, thereby promoting the transfer of technology, advanced management skills and especially improving the transparency of Vietnamese firms.
Experts attributed the rising trend of this capital inflow to the development of Vietnamese firms and the government’s plans to speed up the privatization and divestment of state-owned enterprises (SOEs).
However, Phan Duc Hieu, deputy director of the Central Institute for Economic Management, recommended that the sale of SOEs should be planned better to gain the highest value. He expected that the operation of the State Capital Management Committee in the future will bring more effective strategies in the SOE sales.