Lawyer in Vietnam Oliver Massmann Public mergers and acquisitions: market analysis overview

1. Lawyer in Vietnam Oliver Massmann Public mergers and acquisitions:
market analysis overview
Largest / most noteworthy public M&A transactions in the past 12 months
Financial
Noteworthy public M&A transactions include the following:
 In May 2015, Sai GonThuong Tin Commercial Joint Stock Bank (more commonly
known as Sacombank) merged with Southern Commercial Joint Stock Bank. Following
the merger, Southern Bank shareholders obtained a 0.75 Sacombank share for each share
they held. The merged entity, to be called Sacombank, will have a charter capital of more
than VND18.85 trillion (US$856 million) and total assets of over VND290.86 trillion
(US$13.2 billion). Sacombank's shareholders agreed to the merger by a 93.7% vote.
 In May 2015, the merger between the Mekong Housing Bank and the Bank for
Investment and Development of Vietnam was completed.
 In May 2015, the Vietnam Bank for Industry and Trade (Vietinbank) merged with
Petrolimex Group Commercial Joint Stock Bank (PG Bank). The change rate for PG
Bank shares to Vietinbank shares was 1:0.9, which means Vietinbank exchanged 270
million of its shares for 300 million of PG Bank shares. The merger increased
Vietinbank's total assets by VND25 trillion (US$1.19 billion) to VND685 trillion
(US$31.7 billion), and its chartered capital by VND3 trillion (US$142.86 million) to
more than VND40 trillion (US$1.85 billion).
 In May 2015, Credit Saison spent about JPY5 billion to take a 49% stake in HDFinance,
Vietnam’s third largest consumer finance business.
 In August 2015, the Mekong Development Bank (MDB) was set to merge with the
Vietnam Maritime Commercial Bank (Maritime Bank) to form an institution that would
be among the country's five largest banks in terms of charter capital. Currently, Maritime
Bank's charter capital is US$373.8 million and MDB's is US$175.23 million, meaning
that the new banking institution would have a charter capital of US$549 million and total
assets of US$5.28 billion.
Other
Retail.Noteworthy public M&A deals include the following:
 On 29 April 2016, Thailand’s Central Group bought Big C from Casino at a value of
USD1.14 billion.
 In June 2015, WarbusPincus invested $100 million into Vincom Retail and still remained
as a minority shareholder.
Food. Noteworthy deals include the following:
 In May 2015, Masan Group acquired 52% of the total shares in Vietnam French Cattle
Feed JSC (Proconco). The acquisition occurred when the group bought 99.99% of the
total shares in Sam Kim Limited Liability Company and renamed it Masan Nutri-Science
Company.

2.  In May 2015, Filipino firm Pilmico Foods Corporation acquired some feed companies in
Vietnam in an expansion bid. Pilmico, a subsidiary of the Aboitiz Group, had bought
70% of the total shares in VinhHoan 1 Feed JSC (VHF) at US$28 million in 2014.
 In July 2015, Mondelēz International completed the acquisition of 80% of the total shares
in Kinh Do Corporation, a popular snack business in Vietnam, for about US$370 million.
 On 30 June 2016, Masan Nutri-Science Joint Stock Company bought additionally 30% of
Agricultural Nutrition Joint Stock Company, leading to its 100% ownership in the
company.
Real estate. Noteworthy deals include the following:
 In May 2015, Duc Long Gia Lai obtained 97.73% of Mass Noble with a transaction value
of $11.7 million.
 In June 2015, 89.42% of Vefac was acquired by VinGroup, although the total transaction
value was not disclosed.
 In June 2015, Gaw Capital Partners (GCP), the Hong Kong-based private equity firm,
acquired an existing portfolio of real estate projects in Vietnam. The portfolio was
purchased for US$106 million and is comprised of four of the remaining projects
originally held under Indochina Land Holdings 2 Ltd.
 In June 2015, an acquisition between Muong Thanh hospitality and Phuong Dong hotel
was completed. Muong Thanh hospitality acquired 100% of Phuong Dong hotel, a part of
the Phuong Dong Petroleum Tourism JSC.
 At the beginning of July 2015, Gamuda Land Vietnam, a division of Malaysian property
developer GamudaBerhad acquired Celadon City from the Saigon Thuong Tin Real
Estate JSC (Sacomreal) and the Thanh Thanh Cong JSC (TTC) for an estimated VND1.4
trillion (US$64.1 million). The estimated original investment is VND24.8 trillion
(US$1.1 billion).
 In 2015, Vingroup has become a dominant local M&A acquirer with a long list of
transactions in the real estate, retail and logistics sectors. Its most notable additions
include:
o Masteri Thao Dien for US$75 million;
o 30% stake ownership in Vinatex for US$26 million;
o 90% stake ownership in Giang Vo Trade Show Center for US$69 million; and
o 30% stake ownership in Hop Nhat Express for US$52 million.
 In December 2015, VinGroup acquired 100% of Hoa Huong Duong company with the
deal value of US$252 million. This transaction has also made VinGroup the holder of
98.3% of Vinaconex-Viettel as this company is a subsidiary of Hoa Huong Duong.
 In March 2016, Lotte bought 70% of the total shares of Diamond Plaza in Ho Chi Minh
from Posco. Deal value was not disclosed.
 In April 2016, Muong Thanh Corporation bought 95% of the total shares of Cienco 5
Land at the value of VND3,500 billion.
Insurance

3.  In April 2016, the merger between ACE Life and Chubb Life was completed, with ACE
Life changing its name into Chubb Life in Vietnam.
 Two months later, FWD insurance company, a branch of Pacific Century, started the
process of acquiring Great Eastern Vietnam after receiving the license for this
acquisition.
The major trends in the structuring of public M&A transactions
In Vietnam, M&A transactions usually take the form of either share or asset acquisitions, with
share acquisition transactions outnumbering asset acquisition transactions.
Share acquisitions by foreign purchasers are commonly structured as offshore direct investments.
The new investor can:
 Acquire shares or capital contributions from an existing shareholder in the target (for
example, a joint stock company, limited liability company, and so on).
 Subscribe for newly issued shares of the target (for a joint stock company).
 Make further capital contributions to the target (for a limited liability company).
In the case of an asset deal, a foreign purchaser must generally establish a new subsidiary in
Vietnam.
In addition, M&A transactions can also take the form of a merger. One or more companies of the
same type can be merged into another company by transferring all assets, rights, obligations and
interests to the merged company, terminating the existence of the merging company.
The 2014 Enterprise Law sets out the types of business structuring that can be used by investors
as a result of M&A transactions. In addition, the 2014 Investment Law is the first law that
regulates M&A transactions and clearly provides that such transactions do not require an
investment registration certificate. Instead, if the target company operates in conditional business
sectors applicable for foreign investors, or the investment leading to foreign ownership of the
target company being 51% or more (in particular, from below 51% to more than 51% and from
51% to above 51%), the foreign investors must seek approval of the local Department of
Planning and Investment of the transaction. In other cases, the target company only needs to
register change of membership / shareholders at the Business Registration Division. This change
has ended years of uncertainty and frustration faced by foreign investors seeking entry into the
Vietnam market or expansion through M&A transactions.
The level/extent of private equity-backed bids in the past 12 months
Investment in the form of M&A transactions is still the most popular form compared with private
equity investment. In recent months, private equity funds have been following the securities
market in Vietnam, especially companies carrying out value chain operations. Consumer goods
and infrastructure are the sectors that attract the most attention. However, due to limited publicly
available information, it is not possible to fully assess the level of private equity-backed bids.
The approach of the competition regulator(s) in the past 12 months
The Vietnam Competition Authority under the Ministry of Industry and Trade (VCA) must be
notified of the transaction if participating companies have a combined market share in the
relevant market of 30% up to 50%. The VCA will then examine whether the calculation of the
combined market share is correct and whether the transaction is prohibited (that is, whether the
combined market share exceeds 50%, except in certain cases). The transaction can be conducted

4. when the VCA issues a written confirmation that the transaction is not prohibited under
competition law.
For more information on the VCA, see www.vca.gov.vn/Default.aspx?lg=2.
Main factors affecting the public M&A market over the next 12 months
The country's deeper and wider integration into the world's economy is offering new
opportunities for M&A activities.
Another factor is the Government’s being put under high pressure to privatize State-owned
enterprises to meet requirements under signed trade pacts, especially the Trans-Pacific
Partnership (TPP).
Encouraging signs for foreign investment include:
 Economic recovery.
 Reformed policies to allow wider access to foreign investors.
 Formation of the ASEAN Economic Community at the end of 2015.
 The conclusion of free trade agreements (FTAs) and the TPP.
 The bouncing back of the stock market.
 New regulations that increase the authorised levels of foreign investment in public listed
companies.
The introduction of the new Investment Law, Enterprise Law and other laws and policies are
creating an improved legal environment for investment and trade in general, and the M&A
market in particular. However, the following factors also affect M&A transactions:
 Divergent interpretations and implementations by local licensing authorities of
international treaties such as Vietnam's WTO Commitments.
 Different licensing procedures applied to different types of transactions (for example, for
foreign invested companies and domestic companies, public companies and private
companies, and for buying state-owned shares or private shares).
Although legal and governance barriers, along with macro instability and the lack of market
transparency are still the greatest concerns for investors, M&A deals in Vietnam are still
expected to be one of the key, effective channels for market entry.
The major expected trends in the Vietnam M&A market include:
 Bank restructurings.
 Acquisitions and anti-acquisitions, especially in the real estate sector.
 Growing Japanese and Thai investment in Vietnam through M&A transactions.
 Reform of SoEs.
The derivatives market is expected to open in 2016, which will help in preventing risks, boosting
the growth of the stock market and in promoting M&A deals.
Please do contact the author Oliver Massmann under omassmann@duanemorris.com if you have
any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam