Vietnam’s M&A Market: Opportunities for Foreign Investors – Investor Opportunities and Concerns

Tam NguyenManager, Dezan Shira & Associates

Investor opportunities in 2018

The government has lined up a number of divestments of State-owned enterprises (SoE) in 2018. This provides an opportunity for foreign investors looking to acquire brands that are well known locally and have a majority market share.

  • Petrolimex – The country’s biggest petroleum distributor will divest a 24.9 percent stake in 2018, valued at VND18.67 trillion (US$ 848.63 million). This will reduce state holdings in the firm from 78.6 percent to 53.7 percent;
  • Airports Corporation of Vietnam (ACV) – The operator of 22 airports in Vietnam, is planning to sell a 20 percent stake in 2018 and 10.4 percent in 2019;
  • Vietnam National Textile and Garment Group (Vinatex) – The textile company will divest the entire 53.48 percent stake held by the state in 2018;
  • VNSteel – Vietnam’s government will divest a 57.92 percent stake in 2018 and another 36 percent in 2020;
  • Vietnam Engine and Agricultural Machinery Corporation (VEAM) – The state planned to divest 52.47 percent of its share in the agricultural machinery manufacturer in 2017, but the sale could not go through. Hence, the government will push for the sale in 2018. VEAM holds a 30 percent stake in Honda Vietnam, 20 percent in Toyota Vietnam, and 25 percent in Ford Vietnam;
  • Construction Corporation No.1 (CC1) – The construction firm along with the Ministry of Construction (MoC) is planning to divest the entire 40.5 percent stake held by the state in 2018;
  • Lilama – The fabrication and installation contractor, currently under MoC, plans to divest 46.88 percent in 2018 and another 51 percent in 2019. As a general contractor, the company is involved in numerous thermo-power, oil refinery, and cement projects;
  • Viglacera – The construction materials company will sell a 20.62 percent stake 2018 and the remaining 36 percent held by the state in 2019;
  • Vinapharm – The State-owned pharmaceutical firm could divest 65 percent of its stakes in 2018;
  • Hanel – The electronics, IT, and telecommunications firm will sell 29 percent in 2018;
  • In addition, divestments are also planned in Hanoi Beer Alcohol and Beverage Joint Stock Corporation (Habeco), Binh Minh Plastics, Tien Phong Plastics, FPT, and Hancorp.

Investor concerns

Although the M&A market was quite active in 2017, investors have held back due to an underdeveloped legal and institutional framework. Issues such as unfair valuations, unable to acquire a controlling stake, and lack of information on public companies have slowed down the divestments of state-owned enterprises.

In addition, the lengthy regulatory approval process for M&A investments has led to delays in transfer of ownership, leading to higher costs for investors.

Looking ahead

The M&A trend will likely continue in 2018, as the government aims for a higher number of divestments, especially in the energy, infrastructure, and telecom sectors. The government is trying to streamline the administrative procedures, increase transparency, and reduce regulatory burdens for investors, which can lead to an increase in M&A transactions for both, the public and private sector.

 

This text is part of a more complete analysis available for free.

Read the full article on Vietnam Briefing.

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