Retail, property deals dominate MAs in 2016

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.

11/01/2017 11:24

According to the Vietnam M&A Forum research group, M&A value in 2016 broke the record of 5.2 billion USD 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 11.3 trillion VND (over 500 million USD), raising its ownership in Vinamilk from 11 percent to 16.4 percent.

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 VND.

Central Group, another Thai firm, also spent 1.14 billion USD 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 percent and 33 percent stake in Masan Consumer Holdings and Masan Brewery, respectively, at 1.1 billion USD.

The purchase of Maximark by Vingroup, one of the local most dynamic, well-capitalised companies in Vietnam, 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 Vietnam’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 percent) of modern retail channels, such as supermarkets, hypermarkets, shopping centres and convenience stores in Vietnam’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 Vietnam, 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 the Republic of Korea, Japan and Singapore.

Notably, Korean Mirae Asset cooperated with AON BGN to spend 382 million USD on buying Keangnam Landmark 72 in Hanoi.

Mapletree Investments, a Singaporean firm, said it had acquired Kumho Asiana Plaza project in District 1, HCM City, at a cost of 215 million USD through the joint venture between Kumho Industrial and Asiana Airlines.

New Life RE also purchased Duxton Hotel in District 1 at 49.2 million USD from Low Keng Huat.

Domestic enterprises were also busy with property M&As in 2016.

TNR Holdings invested 110 million USD to buy TNR Tower Hanoi from Vingroup. Vietnam’s Muong Thanh Group, meanwhile, said it now owns 95 percent of shares at Cienco 5 Land after spending 1.5 trillion VND 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 want to increase their presence in Vietnam 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 Vietnam’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.

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.

VNA

#MAS #retail #property deal