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MPI: Increased M&As could spur infrastructure development

Released at: 15:14, 11/08/2017

MPI: Increased M&As could spur infrastructure development

Photo: Hong Nhung

Minister of Planning and Investment tells Vietnam M&A Forum 2017 of the benefits M&As can provide.

by Quang Huy

Increased merger and acquisition (M&A) activities could spur infrastructure development in Vietnam, which is a current growth imperative, Minister of Planning and Investment Nguyen Chi Dung told the Vietnam M&A Forum 2017 in Ho Chi Minh City on August 10.

The Ministry of Planning and Investment (MPI) has concluded that in order to catalyze growth, investment in the form of M&As in the infrastructure sector needs to increase and expand across many branches of the economy.

Projects would include upgrading roads, railways, airports, and seaports to global standards, as well as establishing a stable network of real estate and retail conglomerates.

M&A deals in Vietnam hit an all-time high of $5.8 billion in 2016, up 11.92 per cent against 2015. A new chapter has begun in the 2014 - 2018 period, riding what experts have called a second wave of investment. Capital inflows from foreign investors during this period is expected to reach $20 billion, 25 per cent of which could happen this year, largely driven by equitization commitments for major State-owned enterprises (SOEs), the rise of the private sector, and the steady flow of investment from foreign economic entities.

The retail and real estate sectors were the most attractive areas for M&A activities in 2016. Mr. Tran Vinh Du, Deputy Director of M&A Counselling at Ernst and Young Vietnam, said that 2017 and 2018 are optimal times for foreign enterprises and funds to divest, spurring M&A activities.

These units have been present in Vietnam since 2010, purchasing large stakes for low prices during the 2010 economic stagnancy. However, the market has experienced a slowdown since the latter half of 2016, with fewer stellar deals. And the total value of M&A deals was only $1.1 billion in the first quarter of this year, down 24.4 per cent year-on-year. Vietnam’s M&A market is therefore unlikely to surpass 2016’s peak without an extra surge from foreign investors, especially in the real estate and retail sectors.

The M&A trend in these two sectors is expected to intensify over the remaining months of this year, with the participation of foreign investors, primarily from Japan, Hong Kong, South Korea, Thailand, and Singapore.

In the retail sector, one deal that attracted much public attention in late 2016 was the purchase of 78.38 million shares of the Vietnam Dairy Products Joint Stock Company (Vinamilk) by Singaporean food and beverage firm Fraser & Neave (F&N) for VND11.3 trillion ($500 million).

Another major M&A deal last year was Thai group Singha becoming a strategic partner of the Masan Group by purchasing 25 per cent and 33 per cent stakes in Masan Consumer Holdings and Masan Brewery, respectively, for $1.1 billion in total.

Mr. Dang Xuan Minh, Head of the Vietnam M&A Forum’s research group, said that retail and consumer goods M&As targeted at entering and expanding in the market were the most noteworthy trend in 2016. The number of foreign retailers entering Vietnam and the opening of foreign-owned retail outlets through M&As had increased over the last three years, he added.

Even though Vietnam’s M&A market value is small compared with other ASEAN countries such as Singapore ($62.3 billion in 2016) and Indonesia, Thailand and Malaysia ($11 to $16 billion on average), the country has an advantage in terms of its dynamism, according to Ms. Duong Thuy Dung, Senior Director and National Head of Professional Services at CBRE Vietnam. “With the Vietnamese Government on board with M&A growth, the market could see more foreign investors looking to partner with domestic firms,” she noted.

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