Monday, 16:23 21/08/2017
Expecting big M&A deals in the remaining months of 2017
The government is divesting its capital from leading enterprises in fields of beverage, plastics, steel and milk.
Besides waves of Initial public offerings (IPOs) from large scale enterprises to look for strategic partners, the Mergers & Acquisitions (M&A) market is expected to be heated up in the remaining months of 2017.
Wave of equitizations and divestments
In the list of divestment, there are some big names such as Vinamilk (VNM), Binh Minh plastic, Tien Phong plastic, Habeco, Sabeco, Vinaconex. They both have stakes listed in HOSE, HNX stock markets with established brands, long history of operation and steady stream of revenue.
State Capital Investment Corporation (SCIC) has informed its intention of selling 3.3% stakes at Vinamilk VNM (equivalent to 48 million stakes). With an assumption of the VNM’s stake price being stable, if the deal goes through in October, its value will be around 7 trillion VND (308 million USD).
02 plastic enterprises BInh Minh Plastic JSC (BMP) and Tien Phong Plastic JSC (NTP), of which SCIC currently holds 29.52% stakes at BMP (equivalent to 13.4 million stakes); 37.1% stakes at NTP (equivalent to 33.1% stakes) also attract attention from investors. NTP is holding large market share in the North, while BMP dominates the plastic market in the South. Both of them has in common a large shareholder in Thai Plastic and Chemicals PCL (TPC). Leaders of 02 mentioned enterprises said, during meetings with shareholders, TPC wants to increase its stakes at two enterprises. Sabeco and Habeco are other names attracting lot of attention from the market, especially Sabeco when the government is showing its determination in divesting capital from Sabeco to around 51% of stakes in 2017.
For enterprises going through the IPO, many big enterprises are looking for partners. According to leaders of Binh Son Refining and Petrochemical Company Ltd. (BSR), its plan of equitization has been submitted to the government in the beginning of August. With the value of 3 billion USD, there is a high chance that the value of stakes being sold will be around hundreds of millions of USD, while they are expecting significant offers from strategic foreign investors. BSR said if there are interested investors, they are willing to sell stakes under the thresholds of 51%, or even more. As the equitization plan being reviewed by the government, Petrolimex, who is buying 21% products from Dung Quat Refinery, signed an agreement with BSR to purchase BSR’s stakes after the latter completes the IPO.
Meanwhile, many local investors with large reserve of capitals, especially private enterprises are looking for attractive opportunities. For example, a leading enterprise is negotiating of buying Posco group’s stakes at An Khanh Joint venture, the project owner of Splendora urban area. Observers said, if possible, the unnamed enterprise will not stop at the rate of 50%, but purchasing all the stakes to fully take over the projects.
A push from policies
In any M&A agreements, there are two elements attracting attentions from investors. The first is price, and the second one are selling strategies and attached conditions. With the considerable amount of agreements while the stock market is going not so well, the price at the end of the year is deemed to be not so high in comparison to the current. As of now, information and selling strategies should be renewed.
According to Mr. Tong Minh Tuan, director of Ho Chi Mih City Vietcombank, strategic investors (ie, investment in enterprises does not merely mean to buy and sell for profit) hardly buy in the form of public auctions because they cannot control and predict the number of shares that can be bought. They are more likely to appraise and investigate the enterprises in order to provide the most suitable price that ordinary disclosures of information during the auction cannot provide. The investors will then continue to participate in the auction and the highest payer has the right to buy the share. An important feature of this method is that confidential information of buyers and investors does not have to be provided in such a complicated way as of now.
With regard to this issue, the representative of the Department of Finance (Ministry of Finance) said that in the revised draft of the Decree 59/2011/ND-CP on equitation of SOEs submitted to the Government, this new method has been added. This move is expected to open more doors for big M&A deals in the near future.
In the study conducted by Vietnam M&A Forum, the source, quality and quantity, and breakthroughs of foreign capital are expected to be optimistic. Positivity from mechanism and policies is the key for M&A market in Vietnam in 2017 to reach the milestone of 6.2 to 6.2 billion USD, surpassing the record of 2016 at 5.1 billion USD.
Wave of equitizations and divestments
In the list of divestment, there are some big names such as Vinamilk (VNM), Binh Minh plastic, Tien Phong plastic, Habeco, Sabeco, Vinaconex. They both have stakes listed in HOSE, HNX stock markets with established brands, long history of operation and steady stream of revenue.
State Capital Investment Corporation (SCIC) has informed its intention of selling 3.3% stakes at Vinamilk VNM (equivalent to 48 million stakes). With an assumption of the VNM’s stake price being stable, if the deal goes through in October, its value will be around 7 trillion VND (308 million USD).
Production line in Vinamilk.
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For enterprises going through the IPO, many big enterprises are looking for partners. According to leaders of Binh Son Refining and Petrochemical Company Ltd. (BSR), its plan of equitization has been submitted to the government in the beginning of August. With the value of 3 billion USD, there is a high chance that the value of stakes being sold will be around hundreds of millions of USD, while they are expecting significant offers from strategic foreign investors. BSR said if there are interested investors, they are willing to sell stakes under the thresholds of 51%, or even more. As the equitization plan being reviewed by the government, Petrolimex, who is buying 21% products from Dung Quat Refinery, signed an agreement with BSR to purchase BSR’s stakes after the latter completes the IPO.
Meanwhile, many local investors with large reserve of capitals, especially private enterprises are looking for attractive opportunities. For example, a leading enterprise is negotiating of buying Posco group’s stakes at An Khanh Joint venture, the project owner of Splendora urban area. Observers said, if possible, the unnamed enterprise will not stop at the rate of 50%, but purchasing all the stakes to fully take over the projects.
A push from policies
In any M&A agreements, there are two elements attracting attentions from investors. The first is price, and the second one are selling strategies and attached conditions. With the considerable amount of agreements while the stock market is going not so well, the price at the end of the year is deemed to be not so high in comparison to the current. As of now, information and selling strategies should be renewed.
According to Mr. Tong Minh Tuan, director of Ho Chi Mih City Vietcombank, strategic investors (ie, investment in enterprises does not merely mean to buy and sell for profit) hardly buy in the form of public auctions because they cannot control and predict the number of shares that can be bought. They are more likely to appraise and investigate the enterprises in order to provide the most suitable price that ordinary disclosures of information during the auction cannot provide. The investors will then continue to participate in the auction and the highest payer has the right to buy the share. An important feature of this method is that confidential information of buyers and investors does not have to be provided in such a complicated way as of now.
With regard to this issue, the representative of the Department of Finance (Ministry of Finance) said that in the revised draft of the Decree 59/2011/ND-CP on equitation of SOEs submitted to the Government, this new method has been added. This move is expected to open more doors for big M&A deals in the near future.
In the study conducted by Vietnam M&A Forum, the source, quality and quantity, and breakthroughs of foreign capital are expected to be optimistic. Positivity from mechanism and policies is the key for M&A market in Vietnam in 2017 to reach the milestone of 6.2 to 6.2 billion USD, surpassing the record of 2016 at 5.1 billion USD.
