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Chinese acquiring Vietnamese businesses, quietly (Part 1)   2012-04-26 - Dien dan DN

In 2011 alone, there were four big M&A deals in Vietnam committed by Chinese investors, worth 749 million dollars.


The biggest attention has been paid by Vietnamese people to the merger and acquisition (M&A) deals made by Japanese investors, mentioned repeatedly in local newspapers. Meanwhile, experts have warned that Chinese are quietly trying to acquire Vietnamese businesses as well.

The “strange wave” of acquiring Vietnamese businesses

When typing “hoat dong M&A cua doanh nghiep Trung quoc tai Vietnam” on Google, one would get 260,000 results. However, if clicking the links given, one would not obtain further details about the deals. This remains enigmatic why there are a lot of articles about the M&A deals committed by Japanese, while there is no information about the Chinese deals.

This, according to experts, seems to be a strange thing, if noting that in 2010 alone, Chinese companies (mainland, Hong Kong, Macau and Taiwan) made the investment deals worth over 30 billion dollars through M&As.

In 2011, the report of PricewaterhouseCoopers LLP (PwC) showed that the value of the M&A deals of Chinese investors in foreign countries reached the record level of 42.9 billion dollars. 207 M&A deals were wrapped up by Chinese in foreign countries in 2011, an increase of 10 percent in comparison with 2010.

The boom of the overseas M&A deals in 2011 led to the five percent increase of the number of Chinese M&A in general over the previous year with 5364 transactions made--a very high level if compared with that of the years before.

The stable development of the economy has been cited to explain the tendency. In such conditions, M&A has emerged as an important solution that helps Chinese companies expand the market and robust growth.

Chinese companies want to make outward investment in order to better control the input materials, especially minerals and energy. Besides, like Vietnam, Chinese businesses have to bear overly high interest rates in their home country; therefore, they tend to seek cheaper capital sources overseas.

In 2011, Chinese investors registered 4.4 billion dollars worth of foreign direct investment projects in Vietnam, accounting for 30 percent of the year’s registered investment capital.

The figure, according to StoxPlus, is even higher than that of Japan (2.4 billion dollars) and Singapore (2.2 billion dollars). Chinese capital has been poured mostly into manufacturing and processing industries, civil engineering and infrastructure.

As for portfolio investment, including M&A, StoxPlus has pointed out that though the number of deals was not too big, in many cases, Chinese obtained the controlling stakes (more than 49 percent of the stakes of Vietnamese companies).

StoxPlus has reported four large scale M&A deals committed by Chinese, worth 749 dollars in Vietnam in 2011. Only 25 percent of the deals were the M&As, where buyers obtain controlling stakes, but accounting for 81 percent of the total value of the deals. Meanwhile, other deals account for 75 percent in quantity, but only make up 19 percent of value.

Deputy Director of the Competition Administration Department, an arm of the Ministry of Industry and Trade Vu Ba Phu, has confirmed that a lot of takeover deals through the stock market or the stake purchases from investment funds have been reported, including hostile takeover deals.

One of the biggest M&A deal committed by Chinese was the one in which CP Pokphand bought 70.82 percent of CP Vietnam, worth 609 million dollars. According to StoxPlus, with the deal, CP would control 20 percent of the animal feed market share in Vietnam.

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