Thai firms keep up local M&A interest

In the near future, Thai investors are likely to remain enthusiastic buyers of Vietnam’s equitised state firms and private companies in various sectors.



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Sabeco is one of the major targets of Thai firms in terms of acquisitions 



As Vietnam puts more state-owned enterprises (SOEs) on sale by the end of 2017, Thai investors have returned to the spotlight as potential bidders. This month, the State Capital Investment Corporation (SCIC) will part with 3.3 per cent of stakes in dairy giant Vinamilk, and Thai-owned Singaporean firm Fraser & Neave (F&N) is expected to be an eager participant in the sale.

Last December, F&N scooped up 5.4 per cent of Vinamilk’s shares in a public auction held by SCIC. The firm later bought more shares on the stock exchange, boosting its ownership in Vinamilk to 18.74 per cent. Jonathan Seow, an analyst at CIMB Singapore, wrote in a recent report that F&N will be the main vehicle for tycoon Charoen Sirivadhanabhakdi, who also owns Thai Beverage, to expand his grip on Vinamilk.

The Thai businessman is also highly interested in the upcoming sale of Vietnam’s biggest brewery Sabeco. Analyst Soh Lin Sin from Phillip Capital Singapore believes that Sabeco is a strong merger-and-acquisition (M&A) candidate, supported by Vietnam’s favourable macro-economic backdrop and ballooning demand for beer. “A successful acquisition of stakes in Sabeco would be a long-tail catalyst that could power [F&N’s] earnings for years,” wrote Soh.

In the manufacturing sector, Nawaplastic Industries (Saraburi) Co., Ltd., owned by Siam Cement Group, has expressed its intention to gain a controlling stake at Binh Minh Plastics, which abolished the cap on foreign ownership in late September. Siam Cement currently owns 20.4 per cent of the Vietnamese plastics firm, which is already earmarked for state divestment. 

Also in September, Siam Cement divested 23.8 per cent from Tien Phong Plastics,

another leading Vietnamese manufacturer. According to researchers at Ho Chi Minh City Securities Corporation, Siam Cement seems to have let go of Tien Phong Plastics because it sees little future in gaining a bigger stake there.

Kelvin Tan, CEO of HSBC Thailand, told VIR that he expects to see continued interest from Thai investors in Vietnam, as they look to expand in a neighbouring country with fast development and a growing middle class, similar to Thailand’s dynamic a few decades ago.

“Thai investors are very confident in the Vietnamese economy. Vietnam has a big untapped consumption market, which is ideal for retail or food and beverages. Its strategic location in ASEAN and relatively low manufacturing costs are also great for export and manufacturing,” said Tan.

In 2016, Thai buyers dominated the Vietnamese M&A market with billion-dollar deals such as Central Group’s acquisition of Big C; Singha, which bought into Masan; and Siam City Cement, which took over the local incarnation of Holcim. Before these moves, TCC spent $800 million to buy out wholesaler Metro Cash & Carry Vietnam. Researchers at the 2017 Vietnam M&A Forum forecast that in the next years, Thai investors will keep a close watch on industry leaders with an extensive distribution network.

Seck Yee Chung, partner at law firm Baker & McKenzie, noted that Thai investors are excited about the prospects of Vietnam’s manufacturing sector, which is no longer reliant on low-value products. “As the Vietnamese market expands, its manufacturing sector is developing strongly and getting more competitive in investors’ eyes,” said Seck.

Tan from HSBC added that, thanks to their experience in their home country, Thai investors would be likely to remain patient about the equitisation and sales procedure of Vietnamese businesses. “They expect some hiccups along the way before the process is improved. Ultimately, Thai investors want a transparent auction that can lead to a win-win situation for both the seller and buyer,” said Tan.

VIR

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