Decree on foreign-related M&A takes shape

Friday, April 18, 2008
Decree on foreign-related M&A takes shape

The Ministry of Planning and Investment is drafting a decree on foreign-related mergers and acquisitions (M&A) to improve the quality of foreign direct investment (FDI) and create favourable conditions for domestic and foreign enterprises to buy back shares.

According to Ngo Cong Thanh, who is in charge of the ministry’s Foreign Investment Department Service Section, the decree will outline legal procedures for M&A deals and set a ceiling for foreign ownership in business transactions.

Thanh said there is increasing demand for M&A activities and the department has received many foreign investors’ questions on the issue.

“This is a basic motive for authorised agencies to speed up the compilation and issuance of the decree,” Thanh said.

To cope with the pressure of fierce competition as Viet Nam integrates into the global economy, local businesses have taken measures to increase their capacity by selling and purchasing shares or merging with other domestic and foreign enterprises.

The growing M&A approach is now widely found across Viet Nam ’s finance and securities sectors. Last month, Malaysia 's RHB Investment Bank, the investment arm of RHB Banking Group, bought a 49% stake in Vietnam Securities. Meanwhile, the HCM City-headquartered Au Lac Securities sold 4.9 million shares or 49% of its chartered capital to Technology CX ( Cayman Islands ).

In February, the State Securities Commission gave Singapore-based Morgan Stanley Holding, a branch of the US leading financial corporation Morgan Stanley, approval to join local Gateway Securities Incorporation (GSI) in a joint venture Morgan Stanley Gateway JSC in Viet Nam . Under the deal, Morgan Stanley Holding bought 14.5 million shares, equivalent to 48.33% of GSI’s chartered capital.

A number of foreign banks have also entered into agreements with local banks. Germany-based Deutsche Bank, the Hongkong and Shanghai Banking Corporation Limited (HSBC), the Australia and New Zealand Banking Limited (ANZ) and Standard Chartered Bank have all signed strategic cooperation agreements to buy shares from Vietnam’s commercial banks – Hanoi Building Commercial Joint Stock Bank (Habubank), the Vietnam Technological and Commercial Joint Stock Bank (Techcombank), the Saigon Thuong Tin Commercial Bank (Sacombank) and Asia Commercial Bank (ACB).

Thanh said while the M&A trend is growing in Viet Nam , attracting FDI through M&A only makes up around 5% of the total. However, he predicted it will increase along with the number of foreign businesses entering the country as Viet Nam meets it WTO commitments.

He said the proposed decree will ensure effective M&A and build a strict legal corridor, but also added there was a need to promote investment and this has not yet received proper attention from localities. (VNA)