An increasing number of major foreign investors are gaining significant stakes in Vietnamese firms this year as local companies caught in fund-raising difficulties get more realistic about acquisitions.
Daio Paper Corp. and Development Bank of Japan's BridgeHead fund last week decided to buy a 38 percent stake in Saigon Paper Corp. The Japanese partners plan to raise their holding further to up to 50 percent.
Saigon Paper, which will have a capital of VND300 billion (US$14.5 million) when the shares are sold, is the largest private paper producer in Vietnam.
According to the Vietnam News Agency, the company holds 24 percent of the tissue-paper market and is one of the top five packaging firms in the country. The Japanese investor will provide technological, management and training support to the Vietnamese company.
Daio is the third largest paper producer in Japan, with sales of $5 billion last year.
Chairman Cao Tien Vi told Thanh Nien that Saigon Paper could have attracted investment easily in 2007. But over the past two years, as a result of the global financial crisis, it had become a difficult task.
The company, however, found an opportunity this year to call for investment from foreign companies. Vi said although a good business record may play an important role in helping his company sell its shares, he believed it was a well-crafted plan for the long term that actually convinced the investors.
He also admitted that Saigon Paper, like other Vietnamese firms, has seen its share prices fall compared to 2007, the boom year for private equity. Local companies now have lower price expectations, he said.
Analysts have said that after two slow years, there is considerable pent-up demand for acquisitions around the world on the strength of a growing economy.
According to a report released by Grant Thornton in March, 20 percent of privately held businesses surveyed in Vietnam expect a change of ownership in the next three years, compared to 12 percent in 2010. Meanwhile, 29 percent plan to finance growth through private equity.
"The general interest in private equity in Vietnam is high with a number of investors raising new funds and therefore the volume of transactions should continue to increase," said Ken Atkinson, partner at Grant Thornton Vietnam.
Hanoi-based FPT Securities Co., a subsidiary of Vietnam's top information technology services firm FPT, on April 1 completed the sale of 11 million shares, 20 percent of the company's chartered capital, to Japan's SBI Securities.
In the largest ever private equity transaction in Vietnam, US-based private equity firm KKR & Co. agreed to pay $159 million for a stake in local fish sauce maker Masan Consumer on April 13.
Madhur Maini, CEO of the Masan Group, said in a statement that the next two years will be "transformational" for the group as it continues to "build a war chest for strategic M&A."
More such transactions are expected to take place in the coming months.
Local e-commerce service provider VietUnion, for instance, said it's about to close a deal in which it will receive an investment of more than $3 million from Japanese group NTT.
Nguyen Hoang Ly, general director of VietUnion, said local companies were finding it difficult to raise capital, and foreign investors can help them solve the problem. Besides, foreign firms also provide technical assistance, he added.
Foreign investors are now interested in Vietnamese companies that have a strong foothold in the domestic market, Ly said.
VietUnion's Payoo E-Wallet is now a leading service in the relatively undeveloped intermediary electronic payment market in Vietnam.