You have been offered important information about mergers and acquisitions in terms of regulations in Vietnam and the process of doing mergers in Vietnam. There are three types of mergers: a merger of two foreign-owned companies, the merger of two local companies, and a merger of a locally-owned company with a foreign-owned one. In the second part of the M&A process in Vietnam, this article introduces steps of doing acquisition in Vietnam and some case studies of M&A in Vietnam.
Acquisition in Vietnam
The process of an acquisition depends on the types of ownership.
An acquisition of a single-member limited liability company (LLC) by another single-member LLC involving foreign-owned companies does not involve any special procedures. There are, however, some additional steps:
+ Submit the transfer of capital contribution documents to the MPI.
+ The MPI can take up to 15 days to process. Once reviewed, they will issue an approval letter, ask for further information, or will ask to make amendments.
+ After receiving the approval letter, the investors will begin steps involved in changing the owner.
– Update the number of members including details of ownership.
– Submit documents related to forming the member’s council – the highest decision making body, and the inspection committee – the main supervisory board of the management structure.
– Any other documents related to tax, business registration, and charter capital.
It is essential to note that a multiple-member LLC is limited to 50 individuals or organizations or a combination of both. This entire process can take up to 40 days.
– The acquisition process is the same if a foreign investor wants to acquire a local company provided the World Trade Organization (WTO) has permitted an acquisition in that particular business sector.
– A ministry level approval is required if there is no WTO or local commitment for the particular business sector. This process can take up to three months.
Some case studies of doing mergers and acquisitions in Vietnam
This part provides typical M&A companies in Vietnam.
Sales or purchase of shares (of joint-stock companies) or contributed capital (of limited liability companies).
This kind of transaction includes the direct contribution to the enterprise via contribution to the charter capital or purchase of newly-issued shares, or purchase of the contributed capital or shares from existing members and shareholders. Both methods result in changing the capital and equity structure in the company.
Case study 1: On May 16, 2019, in Hanoi, Vingroup and SK Group officially signed a cooperation agreement, under which, SK invested USD1 billion in Vingroup and would become a strategic partner of this group. Five days after the agreement was signed, the Korean giant completed the transaction. Through SK Investment Vina II, SK Group acquired 205.7 million VIC shares, equivalent to 6.15% of Vingroup’s chartered capital, becoming the third largest shareholder of this group, following Vietnam Investment Group Joint Stock Company (31.83% of charter capital) and billionaire Pham Nhat Vuong (26.18% of the charter capital).
Case study 2: On April 25, 2019, DHG Pharmaceutical Joint Stock Company (HoSE: DHG) announced that Taisho Pharmaceutical Manufacturing Joint Stock Company had bought a total of 20.6 million shares out of 28.3 million shares that were publicly bid, thereby raising the holding shares to nearly 66.4 million units, equivalent to the ownership rate of 50.78%. Accordingly, DHG Pharma officially became a subsidiary of Taisho.
Case study 3: Mitsui purchased more than 35% of Minh Phu Hau Giang’s shares. Mitsui spent USD153 million on this deal. Minh Phu is not only one of Vietnam’s major seafood producers but it is also known as the world’s largest integrated shrimp producer from farming to processing and sales.
Mitsui started investing in Minh Phu in 2013 by pouring capital into Minh Phu Hau Giang Seafood Joint Stock Company (MPHG), a processing factory of Minh Phu. Since then, Mitsui has contributed to optimizing the management and operation of MPHG. Through investing in the parent company, Mitsui will be able to apply development initiatives at MPHG to the entire Minh Phu Group and take advantage of the established sales network.
Case study 4: On November 1, 2019, BIDV announced the completion of selling more than 603 million shares to its Korean partner, KEB Hana Bank, at the price of VND33,640 per share. The above number of shares corresponds to 15% of BIDV’s charter capital. The total value of this deal is VND20,208 billion, which is equivalent to USD882 million.
Sale and purchase of the entire enterprise
This only applies to sale and purchase of private enterprise or of a number of state-owned enterprises, or a part of them permitted for sale pursuant to the Government’s regulation on transfer, sale or lease of state-owned enterprises.
Case study: In 2019, Saigon Co.op acquired Auchan Vietnam. Accordingly, Saigon Co.op will take 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 from Auchan Vietnam. The whole business operation, employees, and goods of Auchan Vietnam will be managed by Saigon Co.op. All employees of Auchan will join Saigon Co.op’s staff.
Division, separation of company or merger or consolidation of a company
Case study: On December 3, 2019, Vingroup and Masan Group agreed on exchanging shares of VinCommerce and VinEco. According to the agreement, Vincommerce General Commercial Services Joint Stock Company (retail), VinEco (agricultural), Masan Consumer Holding (consumer) will be merged to establish a leading consumer – retail group in Vietnam. Accordingly, Vingroup will swap all shares in VinCommerce into shares of the new company after the merger. Masan Group will take control of the operation while Vingroup is only a shareholder.
Acquiring equity capital via directly or indirectly buying back of debt
This type of M&A means that a party acquiring the controlling rights or equity capital of capital by the settlement of debt on behalf of that company, and in return, the debt-paying party shall be entitled to manage or acquire the company’s capital.
Purchasing the assets or an independent business division of a company (but not a whole company)
This type of M&A means that a company acquires in whole or in part or an of independent business division or manufacturing facility of another company. In practice, this kind of transaction is quite common in the new emerging market like Vietnam to avoid implicit risks when purchasing an enterprise.
Case study: In December 2017, Shinhan Bank Vietnam Ltd. (Shinhan Bank Vietnam) acquired ANZ Bank (Vietnam) Limited’s retail business. This successful transaction has been considered a big step for Shinhan Bank Vietnam’s development in the Vietnam market, as well as a rapid growth for Vietnam retail banking.
The foreign party (or Vietnamese party) in a joint venture company
The foreign party (or Vietnamese party) in a joint venture company purchases the shares/capital contribution of the other party; thus converting it into a company wholly owned by the purchasing party.
Public tender means the sale offer of voting preferential shares which may lead to the ownership of 25% or more shares of a public company or the purchase offer by which the offered party shall sell its shares.
Offshore mergers and acquisitions
This type occurs only with joint venture companies, where all or the majority of the equity ownership of the foreign party is acquired by a third party outside Vietnam, thus the purchasing party indirectly becomes the “foreign party” by possessing or controlling the capital or management of such foreign party.
READ FURTHER: How To Set Up A Manufacturing Business In Vietnam.
To sum up, the second part covers the steps of doing acquisition in Vietnam. The process of acquisition replies on the types of ownership and typical mergers and acquisitions companies in Vietnam, whether the company is bought by a single-member limited liability company (LLC), a multi-member LLC, or a foreign-owned company. Furthermore, some typical mergers and acquisitions companies are also introduced so that readers can understand how companies can work together when the acquisition happens. If you are an investor or a business owner who would like to do mergers and acquisitions in Vietnam, Viettonkin will provide you with a comprehensive solution and professional consultant to your concern.