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Japanese firms eye mergers, acquisitions across Viet Nam

Update: June, 08/2012 - 10:15


Ha Long Shipbuilding Factory in northern Quang Ninh Province's Ha Long City is one of several run by Vinashin. Some of the group's assets are up for sale and are expected to attract the interest of Japanese investors. — VNA/VNS Photo Huy Hung
HCM CITY — Japanese companies are extremely interested in investing in Viet Nam through the mergers and acquisitions route, Onji Yoshimitsu, CEO of Japan's RECOF Corporation, has said.

Speaking at an M&A forum organised by the Vietnam Investment Review newspaper and AVM Vietnam in HCM City yesterday, he said: "Japan's decreasing domestic demand based on population decline is not a short-term phenomenon, so many companies are eager to expand to areas where population and economic growth can be expected."

Japanese companies have been highly interested in doing M&A deals in Asia, particularly Viet Nam, looking at the country as both a growth market and production base, he said.

He was citing a poll done by PriceWaterhouseCoopers last year of over 300 Japanese listed companies and leading privately-owned firms.

Of the 12 countries considered possible investment destinations through M&A — Brazil, Russia, India, China, Viet Nam, Indonesia, South Africa, Argentina, Malaysia, Thailand, and Singapore — Viet Nam ranked third with more than 30 per cent, behind only China (over 60 per cent) and India (40 per cent).

Yoshimitsu said the number of deals with Vietnamese companies increased by 80 per cent last year to 18, placing the country in the fifth position in Asia and higher than Malaysia (17) or Thailand (12).

The trend has continued this year with eight deals between Vietnamese and Japanese companies announced by May, he said. Of them two involved acquisitions of majority stakes and the others, minority stakes.

Some (Japanese) companies think that acquisition of a minority stake can limit their risks, while others require a majority stake to take control of the target company, and the deal structure depends on their strategies, he explained.

The top deals in terms of value were the investments of US$544 million by Mizuho Corporate Bank in Vietcombank, $338 million by Sumitomo Mitsui Banking Corp in the Vietnam Export Import Bank, and $125 million by Sojitz Corp in Interflour Vietnam, a food company.

VinaCapital managing director Andy Ho expected a 40 per cent growth in M&A activity this year, pointed to the first quarter figure of $1.5 billion.

Figures from auditing and consulting firm KPMG Vietnam show that in the first four months there were 60 deals worth almost $2 billion.

Last year there had been 262 deals valued at $4.4 billion, up from 236 deals and $3.2 billion in 2010.

Ho expected foreign participation to continue to expand, providing valuable investment flows through 2012. Last year $2.6 billion were invested in the country through the M&A channel.

"The most sought after sectors will continue to be domestic-related consumption of consumer goods and banking" he said.

John Ditty, chairman of KPMG Vietnam and Cambodia, also predicted both deal numbers and values to rise in the short and medium terms in spite of macroeconomic concerns, with increasing domestic participation and continued strong interest from the Asia Pacific, especially Japan.

But he warned that cultural and management-style differences could cause deals to fall through.

Vinashin to sells stakes

At the forum yesterday, the Viet Nam Shipbuilding Industry Group (Vinashin) said it will sell 13 of its subsidiaries and assets and its stakes in 32 other companies.

The most notable among its stakes were its 10 per cent of Viet Nam Investment Fund worth US$6.85 million, 20.36 per cent of Shell Gas Hai Phong worth $2.28 million and 10.6 per cent of Cas International Container worth $1.4 million.

Meanwhile, assets to be sold included factories in central Quang Binh and Quang Nam provinces and Da Nang City.

Vinashin saw its revenues fall by 81.5 per cent over the first three months last year, reported the Ministry of Transport.

The State-owned shipbuilding giant's revenue reached only VND282 billion ($13.4 million) during the said period.

The ministry attributed the group's declining revenue to cumbersome administrative procedures on import of equipment that hindered the group reaching production deadlines. As a result, Vinashin's industrial value in the first three months only reached VND960 billion ($45.7 million) or 10.4 per cent of its yearly plan and a 72.3 per cent year-on-year decrease. — VNS

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