Thailand
Foreign investors target leading local firms for optimum gain in Vietnam’s market
The Hanoitimes – M&A would help foreign investors avoid lots of investment license procedures as well as save time for researching the market.
Foreign investors are increasingly striking up deals with Vietnam’s leading firms to optimize business opportunities in the local potential market.
In an aim to better exploit the Vietnamese billion dollar pharmaceutical market, Japan’s Taisho Pharmaceutical Co Ltd has recently acquired an additional 9.2 million shares of DHG Pharmaceutical Joint Stock Company, one of the leading companies in the pharmaceutical cosmetics industry and functional foods in Vietnam.
The acquisition has lifted Taisho’s ownership to 32 percent, making it the second largest shareholder in DHG, just behind Vietnam’s sovereign fund – State Capital Investment Corporation (SCIC) – which holds a 43.31 percent stake.
The investment will help the Japanese company get a firm foothold in the Vietnamese pharmaceutical market, of which revenue is forecast to rise from US$5.2 billion last year to US$7.7 billion in 2021 by Business Monitor International (BMI).
According to experts, the local pharmaceutical retail market is large but has yet to see the prevalence of any distributor. The sector’s distribution is still in the hands of private pharmacies with no one seizing a market share of up to 20 percent. This therefore inspired the world retail giants to join in the market.
The paper industry also sees strong encroachment of foreign factors. Another Japanese investor, Sojitz Corporation this year also made a big splash when it purchased Saigon Paper Corporation for US$91.2 million. Saigon Paper is the largest tissue and industrial paper producer in Vietnam with an annual output of 40,000 tons of household paper and 230,000 tons of industrial paper. The purchase of the 95.24 percent stake in Saigon Paper is the first and biggest merger and acquisition deal in the Vietnamese paper industry so far.
The high-profile deal saved Sojitz tons of paperwork to set foot in the Vietnamese paper market and capitalize on the fast rising demand for industrial paper in the country and in China.
Besides Japanese firms, Thai, South Korean and Singaporean investors have also invested heavily in Vietnam’s biggest firms in recent years.
Thai Beverage Public Company Limited (ThaiBev), for example, has so far spent some US$5 billion to become the biggest shareholder in the largest Vietnamese brewer Sabeco. After the deal, big changes in structure have been made in Sabeco. The firm has a Thai CEO and three Thai members on the board of management. It is also planning to restructure production, distribution, marketing, supply chain and logistics. These moves aim to help it increase market share.
Hot investment trend
According to experts, many foreign investors consider investment into leading local firms the most effective and fastest way to penetrate and expand operations in the Vietnamese market.
Doing business this way would help them avoid lots of investment license procedures as well as save time for researching the market.
“Instead of directly investing in new projects, which require registration procedures and uncertainty, many foreign investors choose to buy shares of companies with existing strong brands in the market to optimize their investment,” expert Nguyen Tri Hieu said.
Besides, foreign investors have preferred buying shares of local firms as they see high growth prospects in them besides the government’s efforts to improve the country’s business and investment environment to support businesses.
Data from the Ministry of Planning and Investment’s Foreign Investment Agency showed that in the first eleven months of 2018, there were 5,882 instances of capital contribution and share purchase by foreign investors into Vietnamese firms with the total value reaching US$7.6 billion, up 44.4 percent on-year.
Experts also forecast that the investment trend will continue spiraling upward in spite of foreign direct investment (FDI) projects comprising a high proportion of total foreign funds.
The acquisition has lifted Taisho’s ownership to 32 percent, making it the second largest shareholder in DHG, just behind Vietnam’s sovereign fund – State Capital Investment Corporation (SCIC) – which holds a 43.31 percent stake.
The investment will help the Japanese company get a firm foothold in the Vietnamese pharmaceutical market, of which revenue is forecast to rise from US$5.2 billion last year to US$7.7 billion in 2021 by Business Monitor International (BMI).
According to experts, the local pharmaceutical retail market is large but has yet to see the prevalence of any distributor. The sector’s distribution is still in the hands of private pharmacies with no one seizing a market share of up to 20 percent. This therefore inspired the world retail giants to join in the market.
The paper industry also sees strong encroachment of foreign factors. Another Japanese investor, Sojitz Corporation this year also made a big splash when it purchased Saigon Paper Corporation for US$91.2 million. Saigon Paper is the largest tissue and industrial paper producer in Vietnam with an annual output of 40,000 tons of household paper and 230,000 tons of industrial paper. The purchase of the 95.24 percent stake in Saigon Paper is the first and biggest merger and acquisition deal in the Vietnamese paper industry so far.
The high-profile deal saved Sojitz tons of paperwork to set foot in the Vietnamese paper market and capitalize on the fast rising demand for industrial paper in the country and in China.
Besides Japanese firms, Thai, South Korean and Singaporean investors have also invested heavily in Vietnam’s biggest firms in recent years.
Thai Beverage Public Company Limited (ThaiBev), for example, has so far spent some US$5 billion to become the biggest shareholder in the largest Vietnamese brewer Sabeco. After the deal, big changes in structure have been made in Sabeco. The firm has a Thai CEO and three Thai members on the board of management. It is also planning to restructure production, distribution, marketing, supply chain and logistics. These moves aim to help it increase market share.
Hot investment trend
According to experts, many foreign investors consider investment into leading local firms the most effective and fastest way to penetrate and expand operations in the Vietnamese market.
Doing business this way would help them avoid lots of investment license procedures as well as save time for researching the market.
“Instead of directly investing in new projects, which require registration procedures and uncertainty, many foreign investors choose to buy shares of companies with existing strong brands in the market to optimize their investment,” expert Nguyen Tri Hieu said.
Besides, foreign investors have preferred buying shares of local firms as they see high growth prospects in them besides the government’s efforts to improve the country’s business and investment environment to support businesses.
Data from the Ministry of Planning and Investment’s Foreign Investment Agency showed that in the first eleven months of 2018, there were 5,882 instances of capital contribution and share purchase by foreign investors into Vietnamese firms with the total value reaching US$7.6 billion, up 44.4 percent on-year.
Experts also forecast that the investment trend will continue spiraling upward in spite of foreign direct investment (FDI) projects comprising a high proportion of total foreign funds.
Source: http://www.hanoitimes.vn/investment/2018/12/81E0D0AA/foreign-investors-target-leading-local-firms-for-optimum-gain-in-vietnam-s-marke/