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Vietnam logistic booms with million-dollar M&A deals done

The logistics market in Vietnam is booming with million-dollar merger deals being signed and many foreign companies striving to increase market share.



Cargo containers are loaded from ships at Tien Sa Port in the central city of Da Nang.


But many local logistic companies are still thinking too small and are finding themselves suffering at the hands of bigger competitors.

Pieter Pennings, consulting director of CEL Consulting, said local businesses are feeling the pressure from larger, foreign companies.

He also believes Vietnamese companies need to expand their tech network in order to keep up with the competition.

Earlier this month, Singapore-based Symphony International Holdings spent US$42.6 million to buy 28.57 per cent of Indo Trans Logistics Joint Stock Company (ITL Corp) from Singapore Post.

Previously, the subsidiary of Japanese Sumitomo Group, SSJ Consulting, spent nearly $40 million to buy 10 per cent of voting shares in Vietnamese logistics firm Gemadept Corporation (Gemadept).

The transaction is expected to take place in the next two weeks. SSJ Consulting has two main shareholders, Sumitomo Group, holding 51 per cent and Japan Overseas Infrastructure Investment, holding 46 per cent.

At the 2019 Annual General Meeting of Shareholders, Gemadept approved the cancellation of a number of business lines with limit on foreign ownership under 49 per cent to welcome new foreign investors.

Logistics is defined as the pillar field of Gemadept. In 2018, Gemadept sold part of its ownership in two subsidiaries to South Korean firm CJ Logistics and collected about $125 million. In mid-2017, another South Korean firm Tae Kwang Industrial Group also offered to buy 51 per cent of Gemadept shares, with an expected value of $444 million.

Also during this time, there was another “silent and quiet” M&A deal, in which Best Inc, a global franchise company in the field of express delivery where Alibaba holds a minority stake, purchased VNC Post Company, from VinaCapital.

Symphony International Holdings, SSJ Consulting, Sumitomo Corporation, Best Inc, CJ Logistics are all well-known names in multi-industry investment in Asia. They obviously are eyeing logistics market shares in Viet Nam and in Southeast Asia.

Over the past 35 years, Symphony has been looking for opportunities to collaborate with exclusive suppliers in the region.

Investing in ITL Corp would benefit the company as the middle class is growing in Asia, Anil Thadani, Director of Symphony, told Dau Tu (Investment) newspaper.

ILT Corp, established in 1999, has a wide network in the logistics industry in Viet Nam and is expanding to Cambodia, Laos, Myanmar and Thailand. ITL Corp provides aviation services, international transportation services, express delivery, e-commerce services and warehousing services with an international standard premise system of more than 150,000 sq.m nationwide.

In 2018, ITL Corp achieved a 50 per cent growth compared to 2017, three times higher than the average growth of the logistics industry. The company aims to develop cross-border e-commerce in the next five years.

Via the deal between Sumitomo and Gemadept, Sumitomo hopes to build a logistics system connecting factories to ports to serve the export of manufactured products.

Sumitomo will develop a mobile application that allows container drivers to pre-register the time of loading and unloading goods at ports and to handle other paperwork.

Gemadept currently owns six ports and accounts for more than 10 per cent of logistics market share in Viet Nam, while Sumitomo is managing three industrial parks in Ha Noi and a logistics facility in Viet Nam.

Sumitomo representative told Dau Tu that an estimated 14 million containers of goods were transported to and from Viet Nam each year. With an average growth rate of 7 per cent per year, this figure could increase to 23 million containers by 2025 and logistics would become a promising sector in Viet Nam.

Local frailness

Vietnamese logistics businesses are under high competitive pressure, said Pieter Pennings, consulting director of CEL Consulting.

The country currently has more than 1,300 logistics enterprises, of which only a minority of 2 – 3 per cent are foreign firms, but they hold 70-80 per cent of the industry's market share.

Viet Nam logistics enterprises mostly provide small services, due to their weak capacity. Due to the large gap between service quality of Viet Nam and foreign firms, customers still choose to use the services of foreign providers, according to Pieter.

Foreign logistics enterprises can easily provide their services to large corporations because they can offer full-package logistics services, while local businesses only provide sporadic and disjointed services.

Especially, very few domestic firms own effective information technology systems compared to competitors from abroad.

The logistics industry is expected to account for 8-10 per cent of Viet Nam's GDP by 2025. Enterprises in the group of countries that are investing heavily in Viet Nam such as Japan, South Korea, China, Singapore and France will continue their investment more continuously.

According to Pennings, foreign investors will focus to expand their business horizontally (expanding the network) and vertically (expanding service packages, increasing the capacity of providing package services). However, the characteristics of Viet Nam’s industry sector may be different from the experience of investors and this is the parts that Vietnamese partners can support. — VNS


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