What next for Big C after Thai takeover?

May 09, 2016 - 10:32

Thailand’s Central Group and its local partner Nguyễn Kim Trading Company have finally won the fierce battle for ownership of Big C Vietnam after offering 920 million euros (US$1.05 billion) to France’s Casino Group.

Thai companies are gradually acquiring major wholesale and retail companies in Viet Nam – it was Metro first, then Nguyen Kim and now Big C, all within a short period. — Photo baodatviet.vn

Compiled by Thien Ly

Thailand’s Central Group and its local partner Nguyễn Kim Trading Company have finally won the fierce battle for ownership of Big C Vietnam after offering 920 million euros (US$1.05 billion) to France’s Casino Group.

Central Group announced its success but did not disclose details about the capital structure. Electronics and appliances retailer Nguyễn Kim is 49 per cent owned by Central Group.

There were 20 suitors for Big C Vietnam, most of them big players like Aeon of Japan, Lotte of South Korea, BJC and Central Group of Thailand and Saigon Co.op and Masan of Vietnam.

Big C’s revenues last year were worth 586 million euros. It is second only to Co.opmart in terms of number of stores, meaning the acquisition of Big C Vietnam is expected to help Central Group save several years it would otherwise have spent in developing in the Vietnamese retail market.

The presence of many foreign retailers in the country, including from Thailand, will mean a wide range of high-quality goods at reasonable prices for consumers.   

The flip side is that Vietnamese producers and suppliers are apprehensive. After all, despite being opened up only recently, over 50 per cent of the retail market has already been captured by foreign retailers.

Significantly, many of them have ambitious plans to produce right here in Việt Nam.

Central Group’s commitment to continue using local products, maintaining strong relationships with Big C customers, employees and local authorities, and sourcing local goods for Big C stores has not allayed the apprehensions.

Thai companies are gradually acquiring major wholesale and retail companies in Việt Nam – it was Metro first, then Nguyễn Kim and now Big C, all within a short period.

According to the General Statistics Office, in 2015 Việt Nam imported US$8.3 billion worth of goods from Thailand. The figure was $1.8 billion in the first quarter this year.

The General Department of Customs said Thai goods imported into Việt Nam are becoming more diverse, ranging from vegetables, fruits and consumer goods to high-value products such as automobiles.

The number of autos imported from Thailand has risen very quickly: last year Việt Nam imported 26,700 vehicles from China, 26,500 from South Korea and 25,000 from Thailand, but this year Thai auto imports have overwhelmed the others with 7,800 compared to 3,500 and 2,260 for China and Korea.

Analysts said the Vietnamese retail market, since it has opened up, cannot avoid foreign players especially since it is worth dozens of billions of dollars.

Foreign retailers like Metro and Big C not only have prime locations in cities and provinces but also have experience promoting themselves to Vietnamese consumers.

Thai enterprises, for instance, use several tricks.

Metro, though still distributing Vietnamese goods, uses the best spots in its stores to display Thai goods in addition to offering promotions on them with big discounts of 4-15 per cent.

Vietnamese suppliers, unable to sustain the competition, have to gradually reduce selling to Metro.   

The problem for Vietnamese businesses is that for a long time they have focused on exports and neglected the domestic market.

The lack of co-operation between domestic businesses also makes them weak and unable to compete with foreign rivals.

Analysts also said Việt Nam still lacks a specific and transparent economic needs test (ENT) for foreign retailers to protect domestic suppliers. This, along with their deep pockets, has enabled foreigners to win prime positions.

Not only Central Group, which now has 100 stores with about 6,600 employees in Việt Nam, but also many other foreign retailers such as Ministop and Aeon of Japan, Lotte of South Korea and Auchan of France are expanding their presence in the country.

Inversely proportional to the expansion of foreign investors is the slowdown of domestic retailers such as Hapromart, Sapomart and G7 Mart. Even Saigon Co.op and Winmart have a struggle on their hands.

Vietnamese goods sold in Metro have reduced from 10 per cent of the total to 1-2 per cent now. A similar situation is expected at Big C in future.  

State firm IPOs

The Government’s determination to speed up equitisation of major State-owned enterprises has livened up initial public offering (IPO) activities on the securities markets.

And some of the IPOs have been an unqualified success.

The State Capital Investment Corporation, for instance, earned over VNĐ1 trillion (US$44.8 million) by auctioning 3.65 million shares of Kim Liên Tourism Company, which primarily operates in the field of restaurants and catering.

These shares were sold for VNĐ274,200 ($12.19), nine times the starting price of VNĐ30,600.

Analysts said the company’s biggest attraction was its 3.5ha Kim Liên Hotel in Hà Nội’s Đào Duy Anh Street, which is seen as a golden piece of real estate.

The hotel is also close to famous tourist destinations like Thống Nhất Park, Hỏa Lò Prison Museum, the Temple of Literature and Hòan Kiếm Lake.

On March 7 State-run Vissan Co, Vietnam’s leading foodstuff processor raised VNĐ906.84 billion ($41 million) through an initial public offering of 14 percent of its shares, beating its own projection.

Vissan sold all 11.33 million shares on offer at an average price of VNĐ80,053 ($3.60) compared with a starting price of VNĐ17,000.

Vissan’s IPO attracted a total of 142 domestic and foreign investors, who together bid for 63.59 million shares.

The huge demand for its shares was due to its outstanding business results, nationwide production chain and brand name.

Also thanks to owning prime lands, Việt Nam Book Company (Savina) saw its recent IPO attract huge strategic investors though its business results are rather modest.

In March giant property developer Vingroup had bought 65 per cent of Savina, or more than 44 million shares, at VNĐ10,700 a share.

Vingroup’s presence as the major stakeholder helped Savina sell more than 16.7 million shares, or a 24.6 per cent stake, at its initial public offering on March 24 in Hà Nội.

According to Hà Nội Stock Exchange, the shares were sold for an average of VNĐ13,072 as Savina raised VNĐ218.7 billion ($97.2 million).

Analyst said that the participation of major investors in companies’ IPOs is an important factor since it improves their prestige in the market, thus attracting more investors in turn.

Stalled building crisis

Construction of the Sài Gòn One Apartment Project by M&C Joint Stock Company began in 2007.

The US$200 million project near Khánh Hội Bridge in HCM City’s District 1 was to have had a mall, international standard offices and 133 high-grade apartments. But the work stalled three years ago.

On Điện Biên Phủ Street, Bình Thạnh District, there is a half-finished building named DB Tower by Cận Viễn Đông Trade and Investment Ltd. Designed to rise 22 floors, its construction began in 2010 and stopped in mid-2012.

Near DB Tower is the V-Ikon building halted two years ago because of a shortage of funds. The grade A office building was designed with 26 floors.

Several incomplete projects are also seen in District 7, one of which is Kenton Residences. The 9.1ha, $300 million property was to have had nine towers and 1,640 apartments but work came to a halt in 2008.

According to the HCM City Real Estate Association (HoREA), the city now has 137 buildings unfinished or abandoned due to various reasons.

According to Trần Trọng Tuấn, director of the city Department of Construction, they are spread over many districts and have many reasons for their half-finished state, but the most common is lack of funding. Some investors are waiting for positive signs in the estate market to resume work.

Analysts said the golden age of property in 2007-08 sparked off a mad rush to develop big projects though many did not have enough money.

They then borrowed from banks.

But soon enough the market plummeted and banks pulled the plug on funding, leaving many buildings standing as shells and developers unable to continue work. This also caused great loss for the economy.

The abandoned projects are a burden on the banks since their developers cannot repay.

For instance, the Sài Gòn One Apartment Project is mortgaged to BIDV and the lender now has look for buyers to sell the project to get back its money.

Some experts said it is necessary for the city to have favourable policies to support stalled projects so that they are completed.

One of them is to allow developers to sell their projects without land-use rights certificates since many incomplete projects cannot afford to pay the fees and so do not have the certificates. — VNS