but the rising interest is also sparking concerns over hostile foreign takeovers.

 

Ong Tiong Hooi, transaction services partner of PwC Vietnam said: “We have noticed that the appetite for mergers and acquisitions (M&A) activities has not dampened. It is understandable that local companies are now taking the lead as they are based in-country. With Vietnam’s economy on the road to recovery and the anticipated EU-Vietnam Free Trade Agreement taking effect, the next 6-12 months would be interesting to watch how the new normal unfolds.”

According to data from global M&A intelligence service Mergermarket, Vietnam had the highest inbound M&A value in Southeast Asia in the first half of 2020, bringing in $872 million in overall inbound investment between January and June. This was largely driven by Vinhomes’ $651 million investment from a consortium that included US private equity giant KKR and Singapore state investor Temasek Holdings.

More than a week ago, Japanese liquefied petroleum gas vendor Tokai Corporation made a foray into the rapidly-growing Vietnamese market through the acquisition of a 45 per cent stake in each of two subsidiaries of Vietnam’s Petro Center Group. The subsidiaries include Mien Trung Gas JSC (MTG) in the central province of Quang Nam and V-Gas Petroleum Corporation in the southern province of Dong Nai. The deal is part of the Tokai’s efforts to bolster its revenue base through M&A overseas under its mid-term management plan ending in March 2021.

Elsewhere, BG Container Glass (BGC), Thailand’s largest glass container packaging manufacturer by capacity, is also negotiating with investors in Vietnam to buy solar farms worth over one billion Thai baht ($32 million) as it seeks new business opportunities in renewable energy.

BGC chief executive Silparat Watthanakasetr said the company aims to diversify its business and is eager to invest in renewable energy.

Similarly, Thai-invested Gulf Energy Development Plc. listed in the Stock Exchange of Thailand has spent $200 million acquiring two wind farms from Dien Xanh Gia Lai Investment Energy JSC (DGI) in Vietnam. The deal aims to take advantage of low interest rates as the company seeks projects with a quick return on investment.

The two onshore wind farm projects are Ia Pech 1 and Ia Pech 2, each with a capacity of 50MW. The projects, located in Ia Grai district of the Central Highlands province of Gia Lai, will be held by wholly-owned Gulf International Holding Pte. (GIH) with a licence to develop and operate the wind farms.

Foreign dealmakers remain upbeat about the prospect of Vietnam’s M&A markets. However, the growth of inbound M&A is also causing debate over the possible increase of hostile takeovers by non-Vietnamese groups. There are some proposals for the government to temporarily suspend or limit M&A over Vietnamese enterprises during the pandemic period to protect domestic enterprises from such a situation.

Vu Thi Que, chairwoman of law firm Rajah & Tann LCT, told VIR that from a legal perspective, she believes the government shall need to consider very seriously the legality of any restrictive measures if taken. Vietnam has made several commitments under international treaties and great efforts for opening its door to welcome investors and have a market economy nowadays with more freedom of business and equal treatment of every investor.

“This explains why the domestic laws generally do not provide any prohibitions or restrictions against foreign investors from making their investments into Vietnam, including M&A over the local companies,” Que said.

As a balance, she said that the necessary protection measures should only focus on essential services and core, strategic, and sensitive business fields.

Que also noted that the current regulations appear to have sufficiently stipulated the necessary restrictions through Vietnam’s commitments under international treaties and business conditions under domestic laws.

In addition, the Law on Competition 2019 prohibits M&A if it causes substantial anti-competitive effects on the Vietnamese market, and requires a prior notification of the M&A which reaches the notification threshold based on several criteria.

These provisions may allow authorised agencies to have a flexible interpretation for the control of the major M&A over the local enterprises providing essential services or core, strategic, and sensitive business.

“Accordingly, if the M&A deals would assist for the development of enterprises and the economy and creation of more jobs, there might be no need to create more barriers to hinder M&A deals even during this pandemic period,” the lawyer noted. VIR

Thanh Van

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