It is not a coincidence that 2 out of the recent top 5 M&A deals in the ASEAN region happened to be in Vietnam.
ThaiBev's acquisition of nearly 54% stakes in Sabeco is considered one of the largest M&A deals in ASEAN.
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In 2017, ThaiBev, controlled by tycoon Charoen Sirivadhanabhhakdi, through its wholly-owned local unit Vietnam Beverage, purchased nearly 54% of Vietnam's largest domestic brewer Saigon Beer Alcohol Beverage (Sabeco) in a deal worth US$4.8 billion. One year earlier, Central Group acquired Big C in an investment of US$6 billion.
The reason is understandable, according to Nirukt Sapru, CEO of Vietnam and ASEAN and South Asia Cluster Markets at Standard Chartered.
"Vietnam is a large market with over 90 million people and has a very young population structure compared to other countries in the region, along with stable economic growth," said Nirukt at a seminar in Ho Chi Minh City in March.
"Every dollar invested in the consumption sector in Vietnam can be profitable."
Vietnam has also been stepping up in the equitization effort of state-owned enterprises (SOEs), in which the state has divested in 21 SOEs last year and 64 so far in 2018, making a viable investment channel for investors.
"Many companies are going to be equitized and in many sectors, not only consumption, such as aviation, telecommunications, and energy," informed Mr. Ralf Pilarczyk, Head of M&A for ASEAN at Standard Chartered.
By 2014, transaction value in Vietnam's M&A market stood at US$400 million, which has later increased to US$2.9 billion in 2015, US$4.7 billion in 2016 and US$6.1 billion in 2017, according to the Foreign Investment Agency.
In the first four months of 2018, a total of US$2.2 billion was pledged to Vietnam through capital contribution and shares acquisition, up 167% year-on-year, according to the investment ministry.
Law firm Baker & McKenzie predicted a total of 331 domestic and cross-border M&A transactions in Vietnam over the next two years. The consumption, retail, and real estate sectors will remain attractive to foreign investors.
Thai footprints in Vietnam's M&A market
Ranked 10th among countries and territories investing in Vietnam, but Thai companies have been establishing and expanding their presences in Vietnam through M&A deals.
As at May, 10 leading enterprises in Vietnam from various sectors have been acquired by Thai companies.
Siam Cement Group (SCG), owned by Thai's billionaire Roongrote Rangsiyopash is a current major shareholder in Binh Minh Plastic, Tin Thanh Plastic and Prime Company.
In total, the Thai group has completed 20 M&A in various fields, establishing 23 subsidiaries in Vietnam. In industry sector, SCG spent VND5.1 trillion (US$240 million) in 2012 acquiring 85% stake in Prime, Vietnam's major manufacturer of ceramic tiles with 30% market share. SCG has now purchased the remaining 15% stakes in Prime for an additional investment of VND1.4 trillion (US$61.25 million).
Last May, SCG has signed an agreement to acquire the 29% stake in Vietnam`s Long Son Petrochemicals (LSP) from PetroVietnam for over VND2.05 trillion (US$90.2 million). Following this deal, SCG now fully owns the US$5.4-billion LSP complex from the previous 71% shareholdings. The project is expected to be commissioned in 2023.
In 2015, SCG has also bought 80% stakes in Tin Thanh Packing (Batico) for VND1 trillion (US$43.75 million). Batico is one of the five largest plastic packing companies in Vietnam, making 230 million square meters of packaging per year.
Through its subsidiary Nawaplastic Industries, SCG has now owned 51.1% in Binh Minh Plastic, the country's leading manufacturer and trader of plastic pipes and fittings.
The Thai group also holds shares in a number of companies specializing in the production of household plastics, such as Viet-Thai Plastchem, TPC Vina Chemical and Plastic Corporation, and Minh Thai House Component.
F&N Dairy Investment and F&N Bev Manufacturing, a 100%-owned subsidiary of Fraser & Neave and backed by Thai tycoon Charoen Sirivadhanabhakdi, own a combined 19.06% shares at Vietnam Diary Products Company (Vinamilk), worth VND52 trillion (US$2.27 billion).
According to economic experts, Thai investors will continue to pay special attention to the Vietnam market as Vietnam has been maintaining a rapid economic growth and the middle class is growing.
With a large domestic market, favorable geographic location and low production cost, Vietnam is considered well suited to the development of industrial production and export of goods to ASEAN.
