M&A deals booming in stock market age

With the rapid development of the stock market, merger and acquisition (M&A) deals have been booming as enterprises consider this a good way to get bigger.

According to the Ministry of Industry and Trade’s Competition Administration Department (CAD), the value of M&A cases in 2007 may triple 2006. The M&A deals in the first half of the year were worth $626mil, which was double 2006’s value and 15-fold higher than during the same period last year.

The M&A deals were seen not only in domestic owned companies, but in foreign invested enterprises as well. Among the 46 successful deals, there were 16 domestic owned and 30 foreign invested cases. The merged and acquired companies operated in different fields of banking and finance, industrial production, food processing and beverages.

Big M&A deals included Eximbank’s sale of 17.8% of its shares to 16 strategic shareholders worth $248mil. The bank is also going to sell shares to Japan’s Sumitomo.

The second case was the one in which Indochina Capital bought 20% of shares of Hoang Quan Real Estate Joint Stock Company at $20mil, and bought shares of Hoang Quan – Mekong Real Estate Trade and Service Company at $12mil.

People might have heard about the deal in which Japan’s Sojitz purchased 20% of Interflour Vietnam at $80mil to get shares of the second biggest wheat flour company in Vietnam. VinaCapital bought 70% of shares of Omni Saigon Hotel worth $21mil. In April 2007, Anco bought Nestle’s dairy processing workshop in Son Tay. Most recently, in early June 2007, HSBC successfully bought 15% of Techcombank shares, and it is now going to buy another 5%. Deutsche Bank has signed an agreement to purchase 20% of Habubank shares.

The two deals in which Japan’s Daiichi bought Bao Minh CMG and Australia’s Qantas bought 30% of Pacific Airlines were also listed as big deals of 2007. The two deals were not only considered very successful affairs in terms of contract value but also very important in the restructuring of state owned enterprises.

Bui Thanh Nga, Deputy Head of the Legal Department under the State Securities Commission, said that the development of the stock market was the most important factor in the increase of M&A deals. However, she said that Vietnam’s M&A market was now still in an early stage of development.

Source: VNE