M&A need clear, detailed regulations

Laws - More merger and acquisition (M&A) deals have been taking place in Vietnam, but sector observers say clear regulations are needed to govern such activities.

One merger announced recently was that of the Gia Dinh Bank, which is now called the Ban Viet Bank (Viet Capital Bank) after a group of investors acquired a 30 per cent stake in it. Nguyen Thanh Phuong, chairwoman of Viet Capital Asset Management was voted the bank’s chairperson and To Hai, CEO of Viet Capital Securities Company, an executive member of the bank. The former Gia Dinh Bank is among the smallest ones in the industry, which had just increased its charter capital to VND3 trillion (US$140 million) from VND2 trillion ($93.9 million).

In another case, Sacombank (STB) recently registered to buy back 100 million shares, or almost 10 per cent of Sacombank, worth around VND1.3 trillion ($61 million). It is the biggest transaction of this kind to date in the country. Earlier, the bank had increased its charter capital by 17 per cent, collecting VND1.377 trillion ($64.6 million) from the new share issue. It is surmised that the latest purchase is perhaps from a foreign bank, which holds 10 per cent and wants to divest. STB is said making the purchase to avoid the stake falling into the hands of an unfriendly investor. The bank had required, upon selling the stake to the foreign partner, that it would be given priority in acquiring the stake should the buyer choose to divest. Sacombank has not yet officially announced the price at which will buy back the stake. However, the buying duration of one month (November 15 – December 15) that the company has announced is impractical on the trading floor, where the average liquidity of this share has been less then one million units per trading day.

Similarly, the Corporation for Financing and promoting Technology, listed on the HCM Stock Exchange as FPT, plans to buy back corporate bonds worth VND1 trillion in face value. FPT, which is also exercising its buy back option, is doing so to prevent Orchid Fund of Singapore from increasing its stake to become the largest shareholder, thus having a position on the executive board, including the chairmanship.

Last year, 345 deals worth around $1.7 billion were done in the country, up from 295 and $1.1 billion in 2009. By this June, deals worth $1.57 billion were completed.

The Ministry of Planning and Investment plans to propose to the Government and the National Assembly amendments to the Enterprise Law next year that are expected to ring in major changes in the M&A sector.

This will be a right step because M&A deals are dealt with under the Enterprise Law which does not have detailed provisions regarding this business activity.