Last update 4/27/2012 8:34:00 AM (GMT+7)

Chinese acquiring Vietnamese businesses, quietly (Part 2)

VietNamNet Bridge – The successful takeovers of Chinese companies over Vietnamese businesses have raised the worry that many Vietnamese industries would be controlled by the Chinese.

According to StoxPlux, after buying CP Vietnam’s stakes, CP would control 20 percent of the animal feed market share in Vietnam, 77 percent of the animal feed market for industrial pigs and 30 percent of the feed for poultry market.

CP is also believed to become a redoubtable rival to the groups from the US and Europe in animal feed industry. Is the stake purchase the first step of the plan to dominate the Vietnamese animal feed market?

Vu Ba Phu, Deputy Director of the Competition Administration Department said that M&A is one of the forms of economic concentration which is within the coverage of the Competition Law. M&A activities need to be consulted with the department, if the market share of the enterprises carrying out M&A would increase rapidly after the merger.

Meanwhile, Pham Chi Lan, a well-known economist, has warned that the CP’s M&A may lead to the higher reliance of Vietnam on the Chinese supply sources. According to the Ministry of Agriculture and Rural Development, Vietnam needs to import 50 percent of materials needed to make animal feed from other countries, including China.

Recently, SW Kingsway Capital Group of the Hong Kong’s billionaire Jonathan Choi, the owner of Sunwah tower in district 1 in HCM City, has purchased 10 percent of stakes of VinaCapital, the biggest fund management company in Vietnam, at 19 million dollars.. China Investment Group got 19 percent of stakes (96.9 million dollars) from a Vietnamese group to become a co-owner of the Mong Duong 2 Thermopower plant in Quang Ninh province.

According to Nguyen Quang Thuan, General Director of StoxPlus, the author of the M&A Vietnam 2012 report, it’s clear that Chinese companies have been deeply penetrating some Vietnamese industries. Making foreign direct investment (FDI) proves to be the most popular way to do that. However, portfolio investment with M&A deals tends to increase which is believed to be the main tendency in the time to come.

Thuan said that amid the new signs on the M&A market, the watchdog agency soon needs to promulgate necessary regulations allowing to intervene in some transactions, which may lead to the domination or control of the involved parties, to ensure that the Competition Law’s provisions can be implemented in reality. More importantly, the legal frameworks and the actions of the watchdog agency need to strive to protect consumers.

Also according to StoxPlus, in many cases, Chinese businesses made heavy investment or purchased the stake proportions big enough to have the right to control some big companies in the fields of securities, goods and agriculture. However, it’s difficult to recognize the deals, because they have been carried out under the mode of investment trusts, or reported under the names of Chinese residents. In these cases, the M&A would be recognized as “domestic deals”.

The number of M&A deals carried out by Chinese companies in Vietnam is much lower than the number of deals by the investors from Japan, the US or Russia. However, the analyses have pointed out that Chinese groups strive more to acquire Vietnamese companies when purchasing their stakes.

Japan, for example, spent over one billion dollars in 26 affairs in Vietnam in 2011, and only 26 percent of the affairs aimed to obtain controlling stakes. The US groups poured 548 million dollars in 2011 into seven affairs, and 100 percent of the affairs were just private equity investments.

In 2011, the total value of the M&A deals in Vietnam was 6.6 billion dollars.

Source: Dien dan DN