Policy reform is key to unlock Vietnam’s M&A future

As new policies and trade deals change the focus of M&A inflows to Vietnam, the Vietnamese government is expected to remove legal barriers, create a positive environment for foreign investors, and push the divestment process at state-owned enterprises.

In the first panel discussion at yesterday’s Vietnam M&A Forum 2019 in Ho Chi Minh City, policymakers and industry experts have talked at length about legal reforms that can push the M&A market forward.

Regulators’ viewpoint

According to the experts, foreign investors look forward to higher levels of transparency and corporate governance at Vietnamese firms, especially when it comes to state-owned enterprises (SOEs). This ranges from information on land usage, the rights and obligations of investors, and the disclosure of financial data to the foreign ownership limit.

policy reform is key to unlock vietnams ma future
Dominic Scriven, executive chairman of Dragon Capital, moderated the first M&A panel

Dang Quyet Tien, head of the Corporate Finance Department at the Ministry of Finance (MoF), acknowledged that information disclosure remains an issue at Vietnamese SOEs – partly because of differences in Vietnam’s accounting standards and the International Financial Reporting Standards. The lack of quality information can discourage investors from doing M&A with the companies, said Tien.

“We’re addressing these issues in the revised Securities Law. We’re also revamping the process of hiring valuators for M&A transactions, most notably on the issue of land usage. Not stopping there, before 2025, we’ll require major companies in Vietnam to use international standards in financial reporting,” the official talked of legal reforms already on the horizon.

policy reform is key to unlock vietnams ma future
Dang Quyet Tien from the Ministry of Finance discussed new M&A regulations

When asked about the delays that are plaguing SOE equitisation in Vietnam, Le Song Lai, deputy general director of State Capital Investment Corporation (SCIC), explained that the state investor wants to follow international standards, as well as improve transparency. Companies also want foreign investors with experience in their field, which also delays the process.

“Last November, we received a list of 19 groups and conglomerates which are in the pipeline for equitisation, mostly in power, telecommunications, oil and gas, and agricultural production. State capital at these firms is VND800 billion ($34.78 million),” said Ho Sy Hung, deputy chairman of Vietnam’s Committee for State Capital Management.

Regarding legal reforms on the stock market, Pham Hong Son, deputy chairman of the State Securities Commission, stressed that the revised Securities Law will force companies to list immediately after their initial public sale – which is aimed at providing liquidity and transparency for investors.

“We’re also considering the option of non-voting shares and non-voting depository receipts,” said Son.

policy reform is key to unlock vietnams ma future
Policymakers ensured that the legal framework for M&A will be updated

Concerns of foreign investors

Experts and investors in the first panel emphasised that foreign investors remain greatly interested in Vietnam’s M&A market. Tamotsu Majima, senior director at Recof Japan, said that the number of M&A deals between Vietnam and Japan during the past years has increased remarkably, especially in manufacturing and services.

Similarly, Stefano Pellegrino, chief secretary of the European Chammber of Commerce in Vietnam, said that membership at the EuroCham has been increasing thanks to the EU-Vietnam Free Trade Agreement. He expected this trend to continue.

“European investors are known to be socially and environmentally friendly, as well as willing to offer technological know-how. These are their strengths in the Vietnamese M&A market,” said Pellegrino. Notable sectors of interest are wide-ranging, from renewable energy, pharmaceuticals, logistics, as well as oil and gas to manufacturing and consumer goods, most of which are affected by the trade deal.

policy reform is key to unlock vietnams ma future
European investors are highly interested in M&A in Vietnam, said the EuroCham’s representative

Market consultants at the panel discussion said that transparency is highly valued by investors, and buyers will study market data and the potential partner very carefully before making the next step. This is especially true for Japanese investors.

“Japanese investors need to have a vision for post-merger and integration 3-5 years after the deal, which can be difficult unless there are in-depth dialogues between the partners. This will lay down the foundation for successful M&A, contributing to successful post-merger operations and integration,” said Masahiro Kotaka, managing director of KPMG Japan.

policy reform is key to unlock vietnams ma future
Japanese investors take a more cautious approach in M&A activities

On behalf of her clients, Vo Ha Duyen, partner at Vietnam International Law Firm (VILAF), said that the New Law on Competition might scrutinise M&A deals that have combined sales of $85 million. This can result in more processing time for lawyers and consultants and delay the speed of M&A deals in Vietnam, as more and more deals are crossing this threshold.

policy reform is key to unlock vietnams ma future
Panellists received a plaque of recognition for their participation in this year’s Vietnam M&A Forum

 

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Policy reform is key to unlock Vietnam’s M&A future

Visa and Ho Chi Minh City sign MoU to deliver smart mobility

Visa, the world-leader in digital payments, and the Ho Chi Minh City Department of Transportation have just signed a Memorandum of Understanding (MoU) to drive the development and adoption of digital payments to achieve smart mobility in Ho Chi Minh City.

The MoU will support the city’s plans to become a smart city by 2017 – 2020, with a vision to 2025.

As part of this, Visa and the department (DoT) intend to collaborate to increase the acceptance of digital payments and implement a secure open-loop payment system across all transportation networks.

“Visa is committed to working with its clients, merchants, the government, and partners like the Ho Chi Minh City DoT to drive the adoption of digital payments in Vietnam,” said Dang Tuyet Dung, Visa’s country manager in Vietnam and Laos.

“We are looking forward to bringing our expertise in digital payments and urban mobility to this partnership in the hope that we can accelerate Ho Chi Minh City’s smart mobility plans, providing people with secure, faster, and more convenient ways to pay for their transport and everyday purchases,” she added.

The MoU positions Visa as Ho Chi Minh City DoT’s preferred partner in developing digital payment solutions for the city and outlines a series of initiatives they will be focusing on.

These initiatives may include leveraging Visa’s feasibility study on the transit payment system in Ho Chi Minh City to help educate relevant stakeholders and guide the future direction and policy making of the transit and transit adjacent payments infrastructure and ecosystem.

Visa also intends to work with the DoT to explore opportunities to upgrade the legacy closed-loop payment system by adopting an open-loop EMV contactless technology for all transportation networks.

Finally, Visa intends to share best practices with the DoT through knowledge-sharing workshops and a study tour to meet with transport authorities to share experience on delivering smart mobility solutions.

Visa has a history of successfully supporting clients and public transport operators to deliver contactless payments acceptance in the mass transit industry with involvement in more than 100 projects with public transport operators or authorities across the globe.

By Anh Duc

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Visa and Ho Chi Minh City sign MoU to deliver smart mobility

Trade union needs comprehensive reform to implement FTAs, ILO Conventions: PM

Prime Minister says the implementation of international labour-related commitments in the new generation of free trade agreements and Conventions of the International Labour Organizations (ILO) requires Viet Nam’s trade union to undertake a comprehensive reform. Read more

New business definition eases M&A accounting

Mergers and acquisitions (M&A) have become an important growth strategy for many companies. Yet before engaging in any such activity, companies will need to consider the financial reporting implications of the transaction. This requirement has become especially important following the latest amendments to International Financial Reporting Standard (IFRS) 3 Business Combinations, which will apply to acquisitions that occur on or after January 1, 2020.
new business definition eases ma accounting
From an accounting point of view, the impacts on a buyer’s financial statements will differ depending on whether the buyer has acquired a business or simply a group of assets. Accounting for the former is generally more complex. Differences exist in the recognition of goodwill, recognition and measurement of contingent consideration, accounting for transaction costs, and deferred tax accounting, among others. Over the years, many ­financial statement users have ­complained that the current definition of a business in IFRS 3 was too broad, resulting in too many transactions qualifying as business combinations. The latest amendments to IFRS 3, published in October 2018, aim to make the distinction easier by revising the definition. This change will likely result in more transactions being accounted for as asset acquisitions, rather than business combinations. The ­impact will be seen across all industries, particularly in real estate, pharmaceuticals, and oil and gas.

new business definition eases ma accounting
By Tran Hong Kien Partner of Assurance Services PwC Vietnam

New definition of a business

Under the new definition, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The definition emphasises that the outputs are goods and services provided to customers. The new guidance also introduced a framework to evaluate when an input and a substantive process are present (including for early stage companies that have not generated outputs). To be a business without outputs, there will now need to be an organised workforce.

The amended guidance also allows buyers to apply a concentration test that, if met, eliminates the need for further assessment. The test provides a shortcut for accountants to conclude whether the acquired set of assets is not a business, thus avoiding the costs and complexities of performing a further assessment.

Under this optional test, a set of acquired assets is not a business when substantially all of the fair value of the gross assets is concentrated in a single asset, or a group of similar assets. Gross assets acquired exclude cash, deferred tax assets, and any goodwill that results from the effects of deferred tax liabilities.

The optional concentration test includes the concept of aggregating similar assets. In the real estate industry, for example, it is common for acquisitions to include several properties. Companies should carefully consider the specific facts and circumstances – including class of property, location, risk characteristics, and so on – when concluding whether assets purchased in a transaction are similar.

To illustrate, take the case of a real estate company buying a portfolio of 10 residential homes. All homes are leased out to separate tenants and comprise land and buildings. Each home is considered to be a separate investment property for accounting purposes, and has a different design and layout. However, all homes are located in the same geographical area and the risk profile of the real estate market across that area is similar. In addition, no employees, other assets, or other activities are transferred.

With the concentration test the buyer would be able to conclude that this is an asset acquisition, and not a business acquisition. This is because substantially all of the fair value is concentrated in a group of similar assets.

However, it should be noted that a transaction is not automatically a business combination if the optional concentration test does not result in an asset classification. The buyer would need to assess the transaction in more detail under the full framework of IFRS 3 in order to make a conclusion.

Looking ahead

The latest amendments to IFRS 3 are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020, as well as for asset acquisitions that occur on or after the beginning of that period. Early application is permitted.

IFRS 3 itself and the amendments do not explicitly require additional systems and processes. However, there are a number of features of the standard that could have implications for systems, controls, and the level of expertise required within an entity.

Any organisation in Vietnam engaging in cross-border M&A with businesses based in IFRS jurisdictions would be well advised to determine the accounting treatment for transactions and make necessary preparations ahead of time.

 

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New business definition eases M&A accounting

Industry ministry to submit new solar power price scenarios in September

The Ministry of Industry and Trade will submit to the Government new scenarios for solar power prices in two regions on September 15 based on recommendations the ministry received after presenting its proposal on the matter to the Government’s standing board on July 31.

Deputy Minister of Industry and Trade Do Thang Hai released the information at the regular Government press conference on August 1.

He said the new prices of solar energy will be set based on levels of solar radiation of regions instead of the current single price of 9.35 US cent per kWh.

In the previous scenarios, the ministry proposed four levels of prices corresponding to four ranges of solar radiation. Based on recommendations from ministries, sectors and the Government’s standing board, it later changed to two levels of prices for two regions, one of which comprises six provinces with high solar radiation (including Binh Thuan, Ninh Thuan, Dak Lak and Phu Yen) and the other covers all the remaining localities. Accordingly, the price of solar power in the first region is projected at 1,916 VND (8.38 US cent) per kWh, and 1,758 VND (7.09 US cent) in the second region.

The ministry’s statistics showed total solar power capacity of proposed projects has added up to 25,000 MW and that of wind power 16,500 MW. As of the end of June, 89 solar power plants had been commissioned with total capacity of nearly 4,500 MW. At present, nearly 400 solar power projects are waiting to be added to the power development plans, but they face hurdles posed by the new Planning Law which took effect on January 1 this year.

 

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Industry ministry to submit new solar power price scenarios in September

New association aims to untangle legal impasse

In alignment with improvements in investment policies, both domestic and foreign investors are expected to approach the most comprehensive legal consultancy services on investment in Vietnam, contributing to increasing efficiency amid deepening global integration.

On August 7, a new association for studies and consultancy for business and investment activities in Vietnam will make its debut, expecting to bring the best benefits to businesses and contribute to law-making and enforcement.

Tran Son Vu, head of the association’s Promotion Agency told VIR, “The move is inevitable in the new development era at a time when the country is increasingly integrating into the global economy, and with its new strategy towards focusing more on private investment attraction and increasing the quality of foreign direct investment (FDI). Further, investor demands for the settlement of legal problems are also growing.”

The association will help investors to better access the most comprehensive and ­updated legal policies on ­business and investment, and approach movements and possible trends of foreign inflows, as well as Vietnamese tendencies in investment abroad. It will also work as a link between ­investors and ­government agencies to help them solve concerns over legal issues.

To this end, the association will focus operations into two priority activities – studying demands on investment policy consultancy among investors, businesses, and lawmakers; and assessing investment movements and sectors of most interest in Vietnam, and those of Vietnam abroad.

Other tasks include developing specific research proposals, conducting studies, making appraisals of study results and transferring them to the targeted subjects, as well as assessing trial performances in practice.

With an initial number of 100 members, including highly-qualified and professional lawyers, consultants, legal analysts, and others who have strong economic expertise, the association aims to ­further increase the number in the next five years to serve unmet needs, thus enabling it to become the leading association in studies and consultancy of ­investment policies in the country.

Regulatory complications related to investment policies have been among the top concerns of domestic and overseas businesses in Vietnam including those from locations such as the European Union, Japan, the United States, South Korea, and Singapore. As shown in the latest fiscal year 2018 survey on the operations of Japanese companies in Asia and Oceania, released recently by the Japan External Trade Organization (JETRO) Hanoi Office, the incomplete legal framework and low transparency in legal performance remain among the biggest risks of such investors in Vietnam.

Industry insiders said that Vietnam is possibly forecast to see a rise in FDI inflows from the globe’s big players including Japan, South Korea, the EU and the US, on the back of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the EU-Vietnam Free Trade Agreement, thus possibly resulting in more growing demand for legal advice in the time to come.

To further facilitate business activities, Vietnam has been taking action, including Resolution No.19/NQ-CP dated March 12, 2015 on implementing tasks and solutions focusing on improving the business environment to enhance national competitive capacity (now replaced with Resolution No.02/NQ-CP dated January 2019), and Resolution No.35/NQ-CP dated 2016 on business support and development towards 2020. The Vietnamese government’s efforts are continuing with the upcoming issuance of amendments to the Law on Investment 2014 and the Law on Enterprises 2014 with improvements on the business ­climate which aim to create more favourable conditions for ­businesses.

Acknowledging the new situation with unfavourable global changes and the wide influence of the Fourth Industrial Revolution, Vietnam is to utilise a new-generation FDI ­attraction strategy towards 2030 with new improvements in the country’s ­investment attraction ­orientation and incentives, thus enabling international investors to make the next steps.

According to statistics from the Ministry of Planning and Investment, Vietnam ­attracted about $20.2 billion worth of newly-registered, added FDI and stake ­acquisitions in the first seven months of 2019. During the period, the country had 79,300 newly-established ­enterprises with the total registered capital of about VND1 quadrillion ($43.45 ­billion), up 4.6 per cent on-year in the number and 29.6 per cent in value.

Nguyen Canh Tinh – Acting CEO, Vietnam Maritime Corporation

new association aims to untangle legal impasse

In this new development era, one of the big challenges to businesses and investors in Vietnam is the weak knowledge of legal issues. The facts show that many businesses have to face risks in their activities due to a lack of prevention tools. We expect that the establishment of the new association will help businesses solve problems, meeting their growing demands among domestic and international investors in the country.

For Vietnam Maritime Corporation (VIMC), we are in the restructuring process, with legal consultancy being a strong focus to prevent us from possible risks in business activities. VIMC is concentrating its operations in port, shipping, and logistics, and is boosting co-operation both at home and abroad. It is important for us to learn thoroughly the rules and policies, as well as international practices so as to enable us to proceed with our plans successfully, and to protect us from any disputes.

Nguyen Van Cuong – General director, Navytex

new association aims to untangle legal impasse

Vietnam’s policies are fairly open for newly-established businesses. However, they often have ­difficulties in understanding tariff policies, business conditions, and administrative procedures. In addition, they may not grasp the support mechanisms of the government for businesses, thereby affecting the orientation of their activities.

As a textile company, we need advice on import and ­export markets, and tariff ­policies for importing and ­exporting raw materials and goods, particularly as Vietnam has signed new-generation free trade agreements.

What is similar and different between these agreements? How can we get the most profit? What kind of documents do we have to prepare for ­import and export in the new context? There are many ­questions, and it will be convenient if someone can provide the answers. Therefore, if there is an ­association specialising in ­consultancy on policies, this will be a place for new businesses to seek those answers.

Duong Ngoc Cuong – CEO SDG Life JSC

new association aims to untangle legal impasse

The establishment of a new association for studies and consultancy for business and investment activities in Vietnam is very necessary for both domestic and ­foreign investors, especially for newcomers who need to learn more about the market and investment policies.

The facts prove that many capable businesses face difficulties when they eye expansion to other new sectors because they lack comprehensive knowledge about the policies on ­investment and business ­activities in these areas. Therefore, professional lawyers and consultants are very important to them.

Like other businesses, we sometimes require legal consultancy for fields of investment, capital use, or financial levers, or new ­policies which we have yet to update.Also importantly, professional legal consultancy will help domesitc and foreign ­businesses to be prevented from possible risks during performance.

 

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New association aims to untangle legal impasse

Vietnam launches Trade Facilitation Agreement implementation program

TFA could reduce Vietnam’s trade costs by 20%, according to the World Trade Organization, more than any Free Trade Agreement tariff reductions. Read more

Top ten outstanding M&A deals in 2018-2019

In 2018-2019, Vietnam continued to witness high-value mergers and acquisitions transactions in a variety of sectors, such as food manufacturing, real estate, banking, and retail.

Foreign investors were involved in almost all of the largest M&A deals in Vietnam. However, It is easy to see that domestic enterprises have also been on the offensive by acquiring foreign companies in increasing numbers.

Here is the list of Vietnam’s 10 largest M&A deals in the 2018-2019 periods selected by Vietnam M&A Forum 2019 announced at the press conference organised by VIR and AVM Vietnam on July 23.

SK Group, Vingroup, and Masan

Notably, SK Group, through its investment arm SK Southeast Asia Investment, has decided to invest $1 billion to acquire the shares of Vietnam’s leading privately-run conglomerate Vingroup, according to Bloomberg.

Previously, Vingroup has announced a plan of issuing shares through a private placement, aiming to raise at least VND25 trillion ($1.1 billion). The group expected to offload 250 million shares, or 7.8 per cent of the shares in circulation, to a maximum of five foreign investors at a minimum price of VND100,000 ($4.3) per share.

Of the total funds raised from the process, around VND10 trillion ($434.78 million) would be used for debt restructuring, VND6 trillion ($260.87 million) to invest in Vingroup’s subsidiaries including VinFast, VinTech, and Vinsmart, and VND9 trillion ($391.3 million) would be allocated as short-term loans for the operations of the group and its subsidiaries.

Regarding Masan Group Corporation (HSX: MSN), in October 2018, Masan announced the completion of SK Group’s purchase of 109,899,932 treasury shares at the unit price of VND100,000 ($4.4), a total consideration of approximately $470 million. SK Group is now the largest foreign shareholder of Masan Group.

Previously, in September, Masan Group signed a strategic partnership agreement with SK Group. The agreement would enable the two parties to draw on each other’s strengths to accelerate Masan’s and SK’s respective growth strategies. The corporate groups aim to jointly pursue transformational business opportunities in Vietnam and to synergise existing business units.

Saigon Co.op and Auchan

In July 2019, Saigon Co.op and French retailer Auchan announced completing the hand-over process of the entire business operations of Auchan in Vietnam. Accordingly, Saigon Co.op took over 18 stores, 15 of which the French retailer has previously closed and three that have been operating at a profit, along with the e-commerce platform and online application of Auchan Vietnam.

Although the value of the acquisition was not revealed, Saigon Co.op’s representative said that the two sides have ended the negotiations on price. Saigon Co.op will operate these stores until the 2020 Lunar New Year after which the sides will sit down to negotiate further co-operation opportunities, including exporting local products via Auchan’s global retail chain.

Truong Hai and HAGL

In April 2019, Truong Hai Auto Corporation (Thaco) expressed interest in buying approximately 70 million shares to increase its holding in Hoang Anh Gia Lai Agricultural JSC (HAGL Agrico) as per the agreement between the two parties, after spending nearly $100 million on buying convertible bonds from this agricultural company.

Accordingly, Thaco registered buying 69.7 million shares in HAGL Agrico to increase its holding from zero to 7.86 per cent. The transaction was expected to be completed between April 23 and May 22, 2019. However, in reality, Thaco bought 4 million registered shares in June. Besides, HAGL registered to sell nearly 60 million shares in HAGL Agrico. The deal was expected to be completed between July 12 and August 10 and Thaco was considered one of the most promising investors.

Vingroup and Fivimart, Hanwa

In September 2018, Vingroup’s retail arm, VinCommerce, completed the acquisition of 100 per cent of the Fivimart supermarket system. These stores were renamed to VinMart, the supermarket brand of Vingroup.

The deal between VinCommerce and Fivimart came after retail giant AEON terminated its deal with Fivimart after four years due to losses, selling its 30 per cent stake in Fivimart.

Besides, in August 2018, Hanwha Asset Management paid $400 million for 84 million preferential shares in Vingroup. The sale came after Hanwha’s unsuccessful attempt to join the $13.5 billion public debut of Vinhomes, the property arm of Vingroup, back in May 2018.

Mitsui and Minh Phu

In June 2019, MPM Investments Pte., Ltd., a subsidiary of Japan’s Mitsui & Co., Ltd., acquired 60 million shares in Minh Phu Seafood JSC (MPC) to raise its stake in the Vietnamese shrimp processor to 35.1 per cent.

The purchase was made through a private placement worth nearly VND3.04 trillion ($130.5 million), equivalent to VND50,630 per share. In late-May, MPM bought 10.2 million shares, or a 7.37 per cent stake, in the shrimp processing company.

Taisho and Hau Giang Pharmaceutical

In April 2019, Taisho Group, one of the five largest pharmaceutical firms in Japan, officially acquired a controlling stake in Hau Giang Pharmaceutical JSC (DHG) after spending VND2.47 trillion ($107.4 million) on buying 20.6 million DHG shares.

Through the purchase Taisho increased its ownership in DHG to 66.4 million shares, equalling 50.78 per cent of the stakes. With the offered selling price of VND120,000 apiece, the Japanese pharmaceutical firm spent VND2.47 trillion ($107.4 million) on the deal. The other major shareholder in DHG is State Capital Investment Corporation (SCIC) with 43.3 per cent.

The reason behinds the increase of ownership in a local pharmaceutical firm is because Taisho’s market share in the food supplement and hair growth supplement segments is decreasing in Japan, while Vietnam has great potential to develop these products.

Vinamilk and GTNfoods

In June 2019, Vinamilk completed the purchase of 90.06 million of the 116.71 million shares it registered to buy in GTNfoods JSC. After the deal, Vinamilk increased its holding in GTNfoods to 38.34 per cent. While Vinamilk refused to disclose the value of the deal, based on the VND13,000 share price offered by Vinamilk, the dairy manufacturer may have paid VND1.17 trillion ($50.87 million) on the purchase.

Previously, even though GTNfoods JSC refused its previous proposal, Vinamilk remained still eager to acquire more stakes in the firm (which holds 51 per cent of Moc Chau Milk Company) as part of its M&A strategy to expand its market share in the dairy manufacturing sector.

Sojitz and The Pan Group

In September 2018, The PAN Group (HXS: PAN) completed the private placement of 13.4 million shares to Japan’s Sojitz Group for VND61,000 ($2.7) per share. Sojitz invested VND817.4 billion ($35.54 million), becoming a major shareholder with 10 per cent in PAN.

This private placement provides PAN with more financial resources to invest and implement its next M&A projects in its development strategy in agriculture and food industries. More importantly, Sojitz has been chosen as a strategic partner of PAN to co-operate on upgrading Vietnam’s agricultural and food products for distribution to domestic and international markets.

“This is an important milestone in The PAN Group’s development path. Our selection criteria focused on finding a business partner rather than choosing a purely financial investment organisation. Together with the capital contribution, we established a Collaboration Committee which includes key leaders from the two groups and is chaired by the chairman of The PAN Group. The committee will bring together top industrial experts from Vietnam and Japan in order to formulate and promote the implementation of agricultural and food projects of the two parties in Vietnam and other countries in the region. I believe that the co-operation will contribute to leveraging Vietnamese agricultural and food products in international markets,” said Nguyen Thi Tra My, chief executive officer of The PAN Group.

SonKim Land mobilised capital from its strategic partners

SonKim Land Corporation has successfully concluded a deal that raised approximately $121 million from international investors, including Lemongrass Master Fund, ACA Vietnam Real Estate LP, and Credit Suisse in June 2019.

This deal follows the success of two previous deals in 2013 and 2016. Besides, this deal was Son Kim Land’s biggest fundraising ever since 2013. The fact that existing investors continued to participate in the fundraising and attracting a global bank like Credit Suisse proves that the company has produced quality projects and that it has great potential to grow bigger.

Gelex and Viglacera

In March 2019, the Ministry of Construction (MoC), the biggest shareholder at Vietnam’s largest ceramics and tile producer Viglacera Corporation (Viglacera), sold 69 million Viglacera shares for nearly VND1.6 trillion ($69.57 million). The buyers were reportedly shareholders related to Vietnam Electrical Engineering Equipment Joint Stock Corporation (Gelex).

Gelex now holds 112 million Viglacera shares, equal to a 25 per cent stake. Before the sale, Gelex held 44 million shares.

By Kim Oanh

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Top ten outstanding M&A deals in 2018-2019

Foreign interest in Vietnam’s LNG sector remains high

Foreign investors are diving into developing liquefied natural gas (LNG) and gas-fired power projects in Vietnam, in part due to country’s growing demand for electricity.

Korea Gas Corporation (KOGAS) became the latest player this week after it entered into a Memorandum of Understanding (MoU) with Energy Capital Vietnam (ECV) that provides a framework for the development of a privately funded liquefied natural gas (LNG) regasification terminal, storage, gas supply system and 3,200 MW gas-fired power project near Mui Ke Ga in the southern province of Binh Thuan.

David Lewis, CEO of ECV, said KOGAS’ strong presence in the LNG business, along with ECV’s position as one of the first LNG movers in Vietnam, allows both companies to leverage each other’s strengths to bring low-cost LNG to Vietnam and help address critical energy security needs.

Interest among foreign investors in Vietnam’s natural gas and LNG sectors continues to be high, with the likes of Tokyo Gas and Marubeni Corporation interested in forging ties with domestic entities for potential opportunities in LNG, while the US Trade and Development Agency pledged its support to help improve Viet Nam’s energy security status by providing smart, clean technology and developing the LNG power industry.

LNG consumption in Vietnam is expected to grow at a robust average annual rate of 10 per cent over next decade, driven by Government efforts to gradually diversify away from coal in favour of cleaner alternatives, and the introduction of several LNG import projects to supplement declining domestic production.

The Government has primarily centred on renewable sources such as solar and wind, although their intermittent nature continues to raise questions about reliability, while hydropower, currently a prominent part of the national power mix, is increasingly being scrutinised for its harmful effects on the environment.

This opens up room for gas-fired power generation to assume a larger role in the national power mix, as a cleaner, less- environmentally hazardous alternative to coal and hydropower with a more reliable baseload power source compared with most renewables.

The country’s current power plan – the Power Development Plan VII, revised in 2016 – provides for the construction of 8GW of new gas-fired capacity across Kien Giang, Dong Nai, Quang Nam and Binh Thuan provinces between 2021 and 2027. The projects are likely to be retained in the forthcoming energy plan.

According to analysts from Fitch Solutions, Vietnam’s current crop of gas-to-power projects have a good chance of coming online as planned due to a combination of supportive factors including availability of funding, rising foreign capital inflows into the domestic power, natural gas and LNG sectors and increasingly supportive Government rhetoric for reducing emissions and promoting greater gas use.

 

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Foreign interest in Vietnam’s LNG sector remains high