M&A activity picks up as expected

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Many firms in Vietnam have announced merger and acquisition plans this year as experts predict a consolidation wave to sweep the country.

Shareholders of Saigon Telecommunication & Technology Corp., one of the country's two listed Internet providers, voted on April 28 to approve a plan to sell 100 percent of its capital to Kinh Bac City Development Share Holding Corp.

The board of Kinh Bac had agreed to the transaction a day earlier.

Kinh Bac, the country's third largest listed property firm, is seeking approval from the State Securities Commission for the deal, said chairman Dang Thanh Tam. He expects the deal to close as soon as the third quarter, Tam said.

"The takeover of SaigonTel will help us to better provide telecommunications infrastructure in our industrial zones, making us more attractive to investors, especially high-tech investors," Tam said.

"With the acquisition, we will also have chances to expand our industrial network, since SaigonTel has a huge land fund."

The property developer is trying to lure companies from China to its industrial parks where labor is inexpensive, Tam said.

Kinh Bac, which operates industrial zones in and around Hanoi and the northern coastal city of Hai Phong, has already attracted investment from several foreign companies including units of Japan's Canon Inc. and Sanyo Electric Co.

The M&A activity this year is also taking place between enterprises active in the same sector.

This Saturday, shareholders of Kinh Do Corp. will meet to vote on a plan to acquire North Kinh Do Food JSC and ice cream maker Kido.

The three firms are subsidiaries of Kinh Do Group. After the deal, North Kinh Do and Kido will become units of Kinh Do Corp., the country's biggest listed producer of baked goods and candies.

Luong Quang Hien, deputy general director of Kinh Do Corp., said the tie-up would prevent overlapping competition as Ho Chi Minh City-based Kinh Do Corp. was looking to expand its market in the north while North Kinh Do, based in Hung Yen, plans to operate in the south also.

Hien said the acquisition would increase investment efficiency as well as that of the company's human resources. It would also mean that Kinh Do Corp. could support North Kinh Do and Kido with better financial and management expertise.

In March, VietinBank, Vietnam's third-largest lender by assets, said it had secured government approval to sell 10 percent of its registered capital to the International Finance Corporation (IFC) and has sought approval to sell a 15-percent stake to Canada's Nova Scotia Bank.

In the same month, VNPT Global, a unit of Vietnam Post and Telecommunications Group, sold 10 percent of its shares to Singapore Technologies Telemedia.

The two sides did not announce the value of the deal but Dow Jones quoted a VNPT executive as saying on March 11 that it cost about US$1.1 million.

Though M&A was introduced to Vietnam in 2000, the activity has picked up pace only over the last two or three years, mostly in the form of sales of shares and transfer of capital between foreign-invested and domestic enterprises or between domestic firms.

According to a study by auditing firm PricewaterhouseCoopers, M&A activity in Vietnam in 2009 increased 2 percent on contract value, reaching $1.138 billion. That compares to a record $1.7 billion in 2007.

Dinh Quang Hoan, director of Business Finance Consulting at Ban Viet Securities, told Dau Tu Chung Khoan (Securities Investment) newspaper the M&A activity was increasing as enterprises learned about the benefits of consolidation.

He said the market has recently witnessed a significant increase in tie-ups and mergers as both consultants and authorities became more familiar with the procedures after the conclusion of some successful deals.

"Earlier, it took as many as five months for authorities to deal with a merger application," he said.

Thanh Nien Weekly had in March quoted analysts as saying the trend of local companies purchasing other firms or their assets started last year and would grow stronger this year.

A forum on the M&A activity will take place at the White Palace in HCMC on May 25. The event, jointly held by Dau Tu (Investment) newspaper and Avalue Vietnam under the auspices of the Ministry of Planning and Investment, is titled "Looking toward successful M&A deals."

The forum is expected to be a good opportunity for businesses to share experiences in finding strategic partners for the M&A activity and get a handle on market trends in the near future.

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