Many large and unexpected merger and acquisition (M&A) deals were made in 2016, with retail and real estate continuing to dominate the domestic market.
According to the Vietnam M&A Forum research group, M&A value in 2016 broke the record of US$5.2 billion set in the previous year.
A deal that attracted much public attention since late 2016 was the purchase of 78.38 million shares of the Vietnam Dairy Products Joint Stock Company (Vinamilk) through the stock market. The buyer is Singaporean food and beverage firm Fraser & Neave (F&N), owned by Thai billionaire Charoen Sirivadhanabhakdi.
F&N paid VND11.3 trillion (over $500 million), raising its ownership in Vinamilk from 11 per cent to 16.4 per cent.
In the third quarter, the Thai tycoon's TCC Group also completed its purchase of the entire wholesale network of Metro Cash & Carry Vietnam, including 19 centres and relevant real estate valued at $848 million.
Central Group, another Thai firm, also spent $1.14 billion on acquiring all 32 supermarkets and trade centres of Big C Vietnam from France’s Casino Group.
Another large M&A deal in 2016 was Thai group Singha becoming a strategic partner of Masan Group by buying 25 per cent and 33 per cent stake in Masan Consumer Holdings and Masan Brewery, respectively, at $1.1 billion.
The purchase of Maximark by Vingroup, one of the local most dynamic, well-capitalised companies in Viet Nam, for an undisclosed value, was also considered a significant deal, an example of the flourishing M&As in the retail and consumer goods sectors.
Dang Xuan Minh, head of a research group of the annual Vietnam M&A Forum (MAF), said retail and consumer goods M&A targeted at entering and expanding the market was the most noteworthy trend in 2016.
The increasing entry of foreign retailers into Viet Nam’s market and the opening of foreign-owned retail outlets through M&As, especially by Thai companies, in the last three years have turned the retail sector into a prime example in the local M&A market, he noted.
That fact was attributed to the modest proportion (less than 30 per cent) of modern retail channels, such as supermarkets, hypermarkets, shopping centres and convenience stores in Viet Nam’s retail market, promoting this market’s attractiveness to foreign investors.
Tariffs on many goods will be removed as part of commitments in the ASEAN Economic Community with a population of over 600 million. Meanwhile, the maturity of Thailand’s domestic retail industry also encouraged this country’s retailers to expand overseas business, particularly in countries such as Viet Nam, which has an almost 100-million-strong population, Minh added.
Even without multi-billion dollar deals, real estate was still hot in the M&A market in 2016, with the participation of investors from South Korea, Japan and Singapore.
Notably, Korean Mirae Asset cooperated with AON BGN to spend $382 million on buying Keangnam Landmark 72 in Ha Noi.
Mapletree Investments, a Singaporean firm, said it had acquired Kumho Asiana Plaza project in District 1, HCM City, at a cost of $215 million through the joint venture between Kumho Industrial and Asiana Airlines.
New Life RE also purchased Duxton Hotel in District 1 at $49.2 million from Low Keng Huat.
Domestic enterprises were also busy with property M&As in 2016.
TNR Holdings invested $110 million to buy TNR Tower Hanoi from Vingroup. Viet Nam’s Muong Thanh Group, meanwhile, said it now owns 95 per cent of shares at Cienco 5 Land after spending VND1.5 trillion on the purchase.
Vietnamese Rang Dong Group also acquired a five-star resort complex in Binh Thuan Province.
According to Stephen Wyatt, country head for Vietnam of global real estate advisor JLL, many foreign investment funds told JLL they wanted to increase their presence in Viet Nam through investment cooperation or by buying existing projects, particularly profitable ones.
Chris Freund, CEO of the private equity firm Mekong Capital, believed M&As will continue actively in all fields, especially real estate, agriculture, consumer goods, retail and pharmaceuticals. All foreign clients Mekong Capital has met are interested in these areas, he said.
Sharing a similar view, Alex Crane, general manager at Cushman & Wakefield Vietnam, forecast retail M&As will continue booming in 2017, elaborating that many foreign businesses have yet to enter Viet Nam’s retail market due to the high office rentals. Therefore, the best solution is M&A, usually by forming a joint venture with a Vietnamese enterprise.
Dang Xuan Minh, however, pointed out an array of challenges for M&A activities in 2017, including changes in US policies, the uncertain future of TPP and obstacles to the equitisation of State-owned enterprises.
To have an M&A value comparable with last year, the State must make strong moves to divest its stake in large groups and corporations, he said.