There’s a common thing in nearly all of the merger and acquisition (M&A) deals made recently–that the foreign partners target the leading companies in key business fields, striving to increase their ownership ratios there to penetrate more deeply into the large market with 80 million consumers.
Vietnamese businesses are worth investments
Most of the share transfer deals reportedly occurred with the enterprises in Vietnam’s key industries, while most of the M&A deals had large scale worth tens of millions of dollars. The Vietnamese brands targeted by foreign investors were all very well known to the domestic consumers.
In light industries, the best known deals are the ones under which Japanese Glico bought 10.5 percent of Kinh Do JSC worth $31 million, Thai Nawa Plastics bought Binh Minh and Tien Phong Plastics Companies, Chinese CP Pokphand bought 70.8 percent of CP Vietnam’s stakes.
The Indian leading consumer and service group Marico now holds 85 percent of stakes of ICP Company which is the owner of the well-known brands such as X-Men, L’Ovite. Meanwhile, Daio Paper Corporation and BridgeHead investment fund of the Japanese DBJ hold 38 percent of the Saigon Paper Corporation.
The infrastructure development, building material and cement production have also been attracting foreign investors, even though the real estate market in Vietnam is still gloomy.
Simen Gresik, the biggest cement manufacturer in Indonesia has spent $230 million to buy 70 percent of Thang Long Cement’s stakes, while SGS bought 85 percent of stakes of Prime Group.
Vietnamese businesses have also become the “aiming points” of the investors from Europe and the US, who have been attracted by the Vietnamese large market with 80 million consumers and the ASEAN market with the zero tariffs among the member countries.
Vietnam losing its valuable brands
Pham Chi Lan, a well-known economist, said she feels worried when seeing more and more Vietnamese valuable brands falling into the hands of foreigners.
Lan has noted that the M&A conducted over the last 2-3 years were mostly the ones when the businessmen had to bargain away their businesses after incurring big loss and reaching an impasse.
“In such cases, selling stakes to foreign investor proves to be a golden opportunity for businessmen, like a drowning man who can find a stake to lean on. However, the stake could throw at the businessmen one day,” Lan commented.
In other cases, Vietnamese businessmen sold stakes when their businesses were prospering. The shares of Saigon Paper, Pho 24, ASIA fan or Prime tiles, for example, were sold in the deals with high values. However, according to Lan, since the brands are strong, the values of the deals were not high at all, if considering the great potentials of the brands.
Foreign investors always target the leading companies in their business fields which have big influences to the domestic market. The M&A deals conducted by foreign investors could be the first step in their plans to control the domestic market.
In the next steps, Lan said, the foreign investors would take away the enterprises. “It happened that the Vietnamese partners in businesses had to leave after several years of taking loss. And then the foreign partners would take over the businesses, change the enterprises’ names and cement their positions on the Vietnamese market,” she said.
While economists express their worry about the possible risks of Vietnamese brands to be taken over by foreigners, state management agencies do not take care about this.
“The government now seems to pay the highest attention to the real estate sector. Meanwhile, industrial enterprises which need to be rescued, have not received the appropriate attention,” Lan commented.