Sacombank target of first banking takeover bid in Vietnam

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The banking sector is bracing for what could be a hostile takeover as Eximbank leads other shareholders of Sacombank in demanding a new management board.

While the outcome of this effort is still to be seen, the fact that Sacombank, Vietnam's fourth-largest publicly traded lender by assets, is facing the risk of losing control to another bank has already raised a lot of questions and concerns.

Eximbank (EIB), which owns 9.7 percent of Sacombank (STB) after buying a stake from ANZ in January, claims that it now represents shareholders with a combined 51 percent of Sacombank stock. As such, it is demanding a new board, saying there has been a major change in the shareholder structure after Dragon Capital, ANZ and REE exited Sacombank.

The shareholders represented by Eximbank are also asking Sacombank to raise its 2012 profit target by at least 15 percent to VND4.025 trillion (US$193 million).

"Our group of shareholders is holding 51 percent so we ask for five members on the management board," said Eximbank Chairman Le Hung Dung. "The chairman of the management board will be voted in by the new board, and we'll see what happens."

Whether Eximbank actually represents 51 percent of voting rights in Sacombank is still debated by analysts and insiders. Many analysts, however, agree that the new move by Eximbank is just the beginning of a heated takeover.

"This move shows EIB's deeper involvement in STB and confirms rumors we had been hearing in the market of various parties vying for power at STB," Viet Capital Securities said in a note Monday. "We will be following the story carefully."

Eximbank holds the largest stake in Sacombank, according to data compiled by Bloomberg from the lender's latest filing.

"It is unusual to see this in Vietnam," Karolyn Seet, a Singapore-based assistant vice president at Moody's, told Bloomberg. "It is worrisome, and questions how well a bank can function moving forward if there are all these disputes."

Economist Dinh The Hien said while M&A activities are not all that rare in Vietnam, the usual practice is for investors to merely try and buy stakes in another company, instead of trying to step in and take over the management.

The conditions are now right for M&A activities as the stock market is in a downturn and the banking sector is facing difficulties, Hien said, referring to the Sacombank case as an example.

To prevent a takeover, the management board of a company should own 20-30 percent of its stock, leaving 20-30 percent to fund managers and the rest for other shareholders, Hien said. The board also needs to make sure they have the support of the fund managers, he said.

Sacombank Chairman Dang Van Thanh said nothing is official yet as his bank has not finalized the list of its shareholders for the upcoming annual meeting.

He said Sacombank is still attractive to investors thanks to its wide network, a recent capital increase, a large asset base and a strong liquidity position.

STB share value has increased around 30 percent since December 1, hovering around VND19,000.

Sacombank is now operating normally, the central bank said in a statement Wednesday.

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