Category Archives: Vietnam – M&A

Category related to mergers and acquisitions, securities law and other related issues in Vietnam

3 reasons smart investors are banking on Vietnam

Vietnam’s Gross Domestic Product (GDP) expanded by 6.81 per cent last year, marking its highest growth rate in a decade. The country continues to impress, with the economy growing by 7.38 percent in the first quarter of 2018 – one of the fastest rates in Asia – and total growth is expected to be in the region of 6.7-6.8 percent for the year. It could even hit 7.1 percent, according to the Asian Development Bank.

 

Looking ahead, the Vietnamese Government is seeking to maintain the country’s good growth until at least 2020, with the Prime Minister encouraging private companies – currently accounting for 43 per cent of GDP – to grow and increasing investment into rural areas.

 

There’s much to celebrate about Vietnam’s growth over the last few years, and many investors have already taken note and got in on the action. For those still on the fence, here’s just three reasons why a bet on the country’s economy may pay off handsomely.

 

Switched on to electronics

 

Other countries in the region tend to export raw materials or components to China, where they are assembled into other products. Vietnam exports mainly finished goods.

 

One such producer, the Samsung Electronics factory in Thai Nguyen, in northern Vietnam, employs more than 60,000 people and produces more mobile phones than any other facility in the world. Samsung Electronics’ combined factories in Vietnam produce almost a third of the firm’s global output. So far, the company has invested a cumulative US$17 billion in the country.

 

The relationship has been mutually beneficial, helping to make Vietnam the second-biggest exporter of smartphones in the world, after China. Samsung alone accounted for almost a quarter of Vietnam’s total exports of US$214 billion last year.

 

The company’s presence in Vietnam will not stop there, with co-CEO, Koh Dong-jin, recently informing the Prime Minister of plans to expand production and open further plants.

 

Samsung isn’t alone in Vietnam’s exciting electronics landscape. The export turnover of electronics and household electrical appliances accounted for 28.9 percent of total export turnover. Mobile phones & components, cameras and other machinery brought in revenue of US$61.8 billion, an increase of US$14.45 billion compared to the year before.

 

An international mindset

 

Vietnam received FDI worth 8 percent of GDP last year — more than double the rate of comparable economies in the region. Foreign-owned firms now account for nearly 20 percent of the country’s output. They have grown more than twice as fast as state-owned enterprises over the past decade, despite the country’s nominally communist government.

 

In contrast to China, a large rival in the cheap manufacturing stakes, Vietnam is liberalising its economy to welcome foreign industry. In 2015 the government opened 50 industries to foreign competition and cut regulations in hundreds more. It sold a majority stake in the biggest state-owned brewer, Sabeco, to a foreign firm last year. Similar sales are expected in the coming months.

 

Vietnam’s enthusiasm for free-trade deals has made it especially alluring to foreign investors. It is a founding member of the Trans Pacific Partnership, a multilateral trade agreement that includes Australia, Canada and Japan, among others. Although the agreement fell apart without US support, it was quickly repurposed and renamed. A significant trade pact with the European Union is also on the horizon. The deal signed with South Korea a few years ago has made it South Korea’s fourth-biggest trading partner.

 

Fertile ground for start-ups

 

The government has put forward a number of regulations and programmes to support start-ups, especially innovative ones, including Decree 38/2018/ND-CP (Decree 38) on innovative start-up investment. Decree 38 identifies and recognises innovative start-up investment activities as a business, and cements the legal status of innovative start-up companies and funds.

 

The decree is expected to provide a legal basis for private investors when jointly contributing capital to establish a creative start-up fund and streamline capital flows for creative start-up activities.

 

According to the Vietnam Chamber of Commerce and Industry (VCCI), the country boasts a strong entrepreneurial drive and ranks among the 20 economies with leading entrepreneurial spirit.

 

Up to US$291 million was poured into Vietnamese start-ups last year, a year-on-year increase of 42 percent. However, this figure lags behind the region as whole, which saw investment of US$7.86 billion. The number of M&A deals remains small and no startup has yet made an IPO. Clearly, there is still a lot of room for growth in this sector.

 

The great potential hasn’t gone unnoticed and the government has recognised the tremendous importance that the start-up movement has to the economy and accelerated its development.

 

As well as a young, cheap and plentiful supply of workers, the Vietnamese economy possesses a dynamism unlike others in the region. Nurturing such domestic entrepreneurship is the key to sustainable growth. The Vietnamese government has already set out ambitions of creating a vibrant ‘start-up nation’, with a million new enterprises being born by 2020.

 

These are just a few of the reasons why smart investors should be seriously considering Vietnam as their next investment destination. In addition to the above, economic growth will be driven by manufacturing and export expansion, rising domestic consumption, strong investment fueled by foreign investors and domestic firms, and an improving agriculture sector. These is an abundance of optimism over the country’s future, and the signs are that this year Vietnam will be one of the strongest performers in the region.

 

For more information about investing in Vietnam, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

タイビバ、記録的な5500億円ベトナムM&A取引で外資規制回避方法の実証

タイビバ・サベコ投資ストラクチャーの賛否

タイビバ系関連会社が、法律上「ベトナム国内投資家」としてサベコの49%外国人保有比率上限を突破しました。

ベトナム商工省は、2017年12月18日にサイゴンビール・アルコール飲料総公社(サベコ)普通株の過半数を競売しました。サベコのベトナムビール市場シェアが40%強です。タイ・ビバレッジ(タイビバ)系のベトナム・ビバレッジ社が、このラウンドで放出予定のほぼ全株53.59%を110兆ベトナムドン(約5,500億円)で取得し、ベトナムにとって記録的な取引となりました。

Sabeco's stock chart世界のビール会社から高い関心が寄せられましたが、国内外を含め、入札に参加した企業はタイビバ以外が出ませんでした。(一方、入札にはベトナム人個人投資家が一人参加しました。)その理由の一つは、売却額が高額だったことです。このような売却を予期してよく起きることですが、商工省が競売日を公表した前の6ヵ月の間にサベコの株価が約75%上昇していました。ベトナム・ビバレッジが落札した価格は、1株32万ベトナムドンで2017年度株価収益率のほぼ47倍となります。株価が取引完了後に急落し、過去数週間25万5000ベトナムドン前後の狭帯域で取引されています。

価格に加えて、国際投資家がためらった他の主な理由は、サベコの外国人保有比率上限と、競売公表、入札登録そして競売日のタイミングの組み合わせでしたかもしれません。タイビバでさえが、2017年12月22日に上場しているシンガポール証券取引所(SGX)への報告書で、応札登録のスケジュールが「極めて過密」であり、事前に正式な株主の承認を得ることなく、資金調達の点でも妥協しなければならなかたことを明らかにしました。タイミングは非常に重要ではありますが、ここではサベコの外国人保有比率上限及びタイビバが使用した法的構造をもう少し詳しくみていきます。まずストラクチャーをご理解し、これからの投資案件の準備、そして厳しい締切りに整えるために役立つと願っています。

タイビバ・サベコの投資ストラクチャー

タイビバのサベコに対する出資の法的構造(ストラクチャー)を公開された情報に基づいて以下の表でまとめました。弊所はこの構造をベトナムの現投資法が施行された2015年から提案してきました。弊所の解釈は、投資法第23条により、外国人保有比率51%未満のベトナムで登録されている会社の子会社は、国内投資家と同じ条件で投資活動を行うことができます。この解釈の有効性が今回のサベコ案件により確立され、重大なディールでも、上記のような子会社には外資規制が適用されません。

ThaiBev-Sabeco structure chart

ここで、ベトナム・ビバレッジは、Vietnam F&B Alliance Investment Joint Stock Company(ベトナムF&B) の全額出資子会社となります。タイビバの香港で登録されている間接子会社BeerCo Limited(ビールコ)が、ベトナムF&B 株の49%を保有しています。ビールコ が保有するベトナムF&B株は51%未満で、 ベトナムF&Bの子会社であるベトナム・ビバレッジには、外国人投資家の外資規制が適用されません。従って、ベトナムF&B は、サベコ株を国内投資家として取得することができました。

サベコの外国人保有比率上限

外国人保有比率上限が適用されるサベコ株の過半数を取得する為には、タイビバは、上記の国内企業構造を選択したと発表しました。ベトナム証券規制により、外国投資家が原則としていわゆる「条件付き」事業内容を登録している公開会社の合計49%までしか保有することができません(国際条約や国内法によって別途に定めがない限り)。

条件付き事業内容とは、追加条件(特別な事業ライセンスなど)の対象となる活動です。ベトナム地場企業でよくみられますが、サベコも事業内容を豊富に登録していました。その中には、例えば、流通及び不動産取引などの条件付き活動もあります。(ベトナムでの会社は、全ての事業活動を登録しなければなりません。)事業内容を大幅に再構築しない限り、サベコの外国人投資家への売却は制限されていました。合計49%という上限でしたが、外国人投資家が既にサベコ株の10.4%(ハイネケン5%を含む)を保有していたことを考えると、今回売却対象の54%弱のうち外国人投資家が購入できる上限は39%未満でした。しかし、タイビバ傘下のベトナム・ビバレッジは国内投資家として過半数の株式を取得することができました。

タイビバによるサベコのコントロールはどの程度か?

サベコに対するタイビバのコントロール・レベルは大きな課題です。ベトナム・ビバレッジは、サベコ株の過半数54%を保有しています。但し、ベトナム・ビバレッジの100%親会社がベトナムF&B で、タイビバの子会社ビールコ がベトナムF&Bの少数株主に過ぎません。

政治などをさておき、純粋に法律観点から会社の決議採択要件をみてみましょう。株主総会の普通決議は原則として、総会に出席した株主全員の議決票総数の少なくとも51%を代表する株主の賛成で採択されます。特別決議の場合は、65%以上が必要です。同様に、取締役会の決議は、出席した取締役の多数が賛成するれば採択されます。ベトナムの企業法により、会社が定款で決議採択のためにより高い割合を定めることができます。しかし、公開されている最新の定款により、サベコは標準的な決議採択割合(株主総会51%及び65%、また、7名の取締役会で51%)を設定していました。従って、ベトナム・ビバレッジは、(関連当事者間取引を除き)サベコの株主総会普通決議を一方的に採択し、取締役候補者を選任することができます。

但し、ベトナムF&B株 の少数49%しか保有していませんので、タイビバはベトナム・ビバレッジを完全にコントロールすることはできない可能性があります。ベトナム人個人株主二人が51%を保有しています。2017年12月22日付タイビバのSGX報告書によると、『ベトナムF&Bのベトナム人投資家一人は、ベトナムにおける事業家で、ベトナムで弊社のアルコール飲料販売会社と同じグループの一員です。もう一人のベトナム人投資家は、〔サベコの〕買収に関連する助言を提供し、弊社の現地における事業コンサルタントです。』

上記のストラクチャーは、ベトナムにおける名義借り会社(ノミニー会社)と似たような潜在的問題をもたらします。要するに、タイビバのビールコ は、ベトナムF&B のベトナム人株主二人をどの程度コントロールすることができるでしょうか?

  • ビールコ 及びベトナム人株主は、ビールコ に更なるコントロール権を与える保留事項などの権利保護措置を含む適切な株主間契約を締結し、ベトナムF&B の定款を承認したか?(ベトナム企業法により、政府の承認を受け、発起株主のみが議決権優先株式を掌握でき、また、その有効期限が最大3年間に限られている。)
  • サベコ及びベトナム・ビバレッジの配当金はどうなるか?ベトナム人株主二人は51%をもらえるのか?(配当優先株主には議決権がないため、ビールコには役立たないと考えられる。)
  • タイビバはベトナム人株主の株式を買収することが可能か?いくらで?(ベトナムF&Bの市場価値は今やとてつもなく高くなっているはず。)
  • 彼らが株式を競合へ売却したらどうなるか?
  • もし争う場合、裁判所は株主間の約束を認め、執行するのでしょうか?(ベトナムでは裁判所判決の30%未満しか執行されず、 ましてや外国仲裁判断の承認及び執行。)

ベトナムF&Bの資料が公表されていませんので、全ての疑問を確かめることができませんが、このタイビバ・サベコ出資構造にはいくつかの潜在的なリスクがあります。

新投資法及び国有企業株式化の新管理委員会

ベトナムは、施行から3年間もかからず、投資法を再び改正しようとしています。最初に公開された草案には、M&Aの事前承認を含むM&A活動に影響を与えうる改正条項が含まれています。上記のタイビバ構造は、将来そのまま採用できない可能性があります。新法が早ければ2019年施行される予定です。従って、のちのHabeco、PV Power、PV Oil を含む後の国有株式の放出や商工省が保有するサベコの残り35%の売却は、2018年内にクロージングすれば、上記のストラクチャーを適用するチャンスがあるかもしれません。

その上、省々及び国家資本投資公社(SCIC)から権限を引き継ぐ、これから国有株式の放出を管理する新な国家資産管理委員会を設立する予定です。投資家にとって、今まで交渉したお話相手が変わる可能性があります。

タイビバ・サベコ投資ストラクチャーの賛否

+ 外国人投資家が国内投資家と同じ条件で、
投資活動に参加できる。

- その投資対象を完全に保有せず、
コントロールが限られている。

詳細につきましては、オットー マンフレッド 倉雄(motto@duanemorris.com) 、又はドウェイン・モリス法律事務所で通常連絡を取られている弁護士へご連絡ください。

〈ご注意〉こちらの記事は皆様に情報をお届けする目的でのみ作成・掲載しておりますので、法的なアドバイスとして提供・構成することを目的としておりません。詳細につきましては、当事務所の注意書きをご一読下さい。

ThaiBev’s Record $4.8 billion Vietnam M&A Deal Verifies Foreign Ownership Limit Work-Around

Pros and Cons of the ThaiBev-Sabeco Structure

ThaiBev affiliate’s legal status as a Vietnamese domestic investor enabled it to acquire a majority stake in Sabeco, despite a foreign ownership cap of 49%.

Vietnam’s Ministry of Industry and Trade (MOIT) auctioned off a majority stake in Saigon Beer – Alcohol – Beverage Joint Stock Company (Sabeco) on 18 December 2017. The former State-owned enterprise has a 40% share of the Vietnamese beer market. The Thai Beverage (ThaiBev) affiliate Vietnam Beverage acquired a 53.59% stake for VND 110 trillion (or roughly US$4.85 billion) – a record for Vietnam.

Sabeco's stock chart

No other companies – domestic or foreign – submitted bids despite much interest. One of the reasons could have been the high price. As seems to happen often in anticipation of such sales, within 6 months before the MOIT announced the auction, Sabeco’s share price had risen about 75%. Vietnam Beverage paid VND 320,000 per share – a 2017 P/E ratio of almost 47 times. The price fell quickly after the deal went through, and the shares have been trading within a narrow band around VND 255,000 for the past few weeks.

Besides the price, the other main reason for international investors holding back could have been a combination of Sabeco’s foreign ownership limit and the timing between the official announcement, bid registration, and auction date. Even ThaiBev admitted in its 22 December 2017 Singapore Exchange (SGX) filing that the timeline for the submission of bids was “extremely tight” and that they had to make compromises, including not obtaining official shareholder approval in advance and in terms of financing of the deal. While timing is very important, we will take a closer look at Sabeco’s foreign ownership limit and legal structure of ThaiBev’s investment here. Understanding the structure first can help investors to position themselves for future deals and meet tight deadlines.

The ThaiBev-Sabeco structure

We illustrated the legal structure of ThaiBev’s investment in Sabeco in the following chart based on publicly available information. We have suggested this structure since 2015, when Vietnam’s then-new Investment Law came into force. Our interpretation of Article 23 of the Investment Law is that subsidiaries of companies registered in Vietnam with a foreign ownership of less than 51% can conduct investment activities under the same conditions as domestic investors. The Sabeco deal confirms the validity of this structure in practice, even for bigger deals, and that foreign ownership limitations do not apply to such subsidiaries.

ThaiBev-Sabeco structure chart

Here, Vietnam Beverage is a wholly-owned subsidiary of Vietnam F&B Alliance Investment Joint Stock Company (Vietnam F&B). ThaiBev’s indirectly wholly-owned subsidiary BeerCo Limited, a Hong Kong company, owns 49% in Vietnam F&B. Because BeerCo’s stake in Vietnam F&B is less than 51%, Vietnam F&B’s subsidiary Vietnam Beverage is not subject to investment conditions that apply to foreign investors. Therefore, Vietnam F&B could buy Sabeco shares as a domestic investor.

Sabeco’s foreign ownership limit

ThaiBev announced that it chose the above domestic-company structure to acquire a majority stake in Sabeco, because of Sabeco’s foreign ownership cap. Under Vietnamese securities regulations, foreign investors can only own up to 49% (in aggregate) of a public company where the company has registered so-called “conditional” business lines (unless otherwise provided by international treaties or domestic law).

A conditional business line is an activity that is subject to additional requirements, such as a special business license. Like many Vietnamese domestic companies, Sabeco had a long list of registered business lines, including conditional activities, e.g. – distribution and real estate trading. (By law, a company in Vietnam must register all its business activities.) Without substantially restructuring its business, Sabeco’s sale to foreign buyers was limited. Considering the 49% cap and that foreign investors had already owned 10.4% of Sabeco (including Heineken’s 5%), less than 39% of the total 54% for sale in this round were available to foreign buyers. But as a domestic investor, ThaiBev’s affiliate Vietnam Beverage could buy a majority stake.

To what extent does ThaiBev control Sabeco?

The 4.8 billion-dollar question is ThaiBev’s level of control over Sabeco. Although, Vietnam Beverage has a 54% majority stake in Sabeco, Vietnam Beverage is wholly owned by Vietnam F&B, where ThaiBev’s wholly-owned subsidiary BeerCo owns only a minority stake.

Politics and other levers aside, from a pure legal perspective, the general meeting of shareholders (GMS) can pass ordinary resolutions with approval of attending shareholders representing at least 51% of the votes. Special resolutions require at least 65%. Likewise, decision in the board of management (akin to a board of directors in some other jurisdictions) require a simple majority of all attending board members. Although, Vietnam’s Enterprise Law permits that companies stipulate higher voting thresholds in their charters, Sabeco’s most recent publicly available charter sets out the same default 51% and 65% ratios for the GMS and 51% for its 7-member board. Therefore, Vietnam Beverage can now unilaterally control ordinary resolutions of Sabeco’s GMS (except for related party transactions) and can vote its nominees to the board.

However, ThaiBev may not fully control Vietnam Beverage, because it only has 49% minority stake in Vietnam F&B. Two Vietnamese individual shareholders own 51%. According to ThaiBev’s 22 December 2017 SGX filing, “One of the Vietnamese investors in Vietnam F&B is a business person [who] is in the same group as the Company’s distributor of alcohol beverages in Vietnam. The other Vietnamese investor is the Company’s local business consultant [who advised] the Company in relation to the [Sabeco acquisition].

This raises a number of questions similar to those that arise in nominee companies in Vietnam: How much control can ThaiBev/BeerCo exert over the two Vietnamese shareholders in Vietnam F&B?

  • Did BeerCo and the Vietnamese shareholders enter into a properly drafted shareholders’ agreement and approve a charter for Vietnam F&B with reserved matters and other guards to give BeerCo more control? (NB: Vietnam’s Enterprise Law permits voting preference shares only with Government approval and only to founding shareholders for maximum three years.)
  • What happens with the dividends from Sabeco/Vietnam Beverage – will the two Vietnamese shareholders get 51%? (Dividend preference shareholders have no voting rights, so that wouldn’t be in BeerCo’s interest.)
  • Can ThaiBev buyout those Vietnamese shareholders? How much will it cost? (The market value of Vietnam F&B should be sky high now.)
  • What if they sell their stakes to a competitor?
  • Will the courts enforce the shareholders’ arrangements when contested (less than 30% of Vietnamese court judgments are enforced in Vietnam; let alone foreign arbitral awards)?

We do not know for sure, as Vietnam F&B’s documents are not public, but those are a few of the potential risks of the ThaiBev-Sabeco structure.

New Investment Law and management committee for SOE equitization

It is important to note that Vietnam is in the process of amending its Investment Law (again, after less than three years in force). The first published draft has revised provisions that affect M&A activities – including the dreaded pre-M&A approval requirement. The ThaiBev structure may or may not work in the future. At the earliest, we expect the new law to come into force in 2019. So, upcoming SOE divestments including Habeco, PV Power, PV Oil as well as the sale of the MOIT’s remaining 35% of Sabeco might still be in time to apply the above structure if they close in 2018.

In addition, the Government plans to establish a new State capital management committee to coordinate divestments of all State-owned assets taking over powers from the various ministries and State Capital Investment Corporation (SCIC).

Pros and cons of the ThaiBev-Sabeco structure

+ Allows foreign investors to participate in investments under the same conditions as domestic investors.

– No full ownership and limited control over those investments.

For more information, please contact Manfred Otto at  MOtto@duanemorris.com or any other lawyer you are regularly communicating with at Duane Morris.

Disclaimer: This post has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. Each case should be analyzed individually with the support of competent legal counsel. For more information, please see the firm’s full disclaimer.

『ベトナム国有企業M&A~コーポレートガバナンス』2017年11月16日プレゼン資料

2017年11月16日に日本アセアンセンターが開催した「ベトナム政府との対話~国有企業の株式化とM&A~in 東京」と題したセミナーの私のプレゼン資料です。

トピック

「ベトナム国有企業M&A~コーポレートガバナンス」

  1. 機関設計
    株主総会、取締役会、社長など
  2. 少数株主の権利保護
    株式譲渡制限に関する定款・契約条項

ダウンロードリンクは以下です。

171116 Vietnam SOE and M&A-ASEAN Centre-Otto-JP.pdf

ご質問等ございましたら、オットー(MOtto@duanemorris.com)または弊所で通常連絡を取っている担当弁護士までご連絡ください。

Organization Chart of a Vietnamese SOE

〈ご注意〉こちらの記事は皆様に情報をお届けする目的でのみ作成・掲載しておりますので、法的なアドバイスとして提供・構成することを目的としておりません。詳細につきましては、当事務所の注意書きをご一読下さい。

***

Slides from my recent presentation in Tokyo on “Vietnam State-Owned Enterprises and M&A – Corporate Governance” organized by ASEAN-JAPAN Centre on 16 November 2017.

171116 Vietnam SOE and M&A-ASEAN Centre-Otto-JP.pdf

For more information , please contact Manfred Otto at MOtto@duanemorris.com or any other lawyer you are regularly communicating with at Duane Morris.

Disclaimer: This post has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. Each case should be analyzed individually with the support of competent legal counsel. For more information, please see the firm’s full disclaimer.

Hope and hesitation at M&A forum

Discussion at this year’s Vietnam M&A Forum, which took place earlier this month in Ho Chi Minh City, revolved around the challenges facing Vietnam’s M&A market and the need for a big push to maintain the momentum of previous years.

 

As of this month, deals have fallen short of the record levels in 2016, and surpassing the US$5.8 billion total looks like a tall order. Although impressive, last year’s figure represented just 5% of Southeast Asia’s total M&A activity, with Singapore alone claiming over 50%. Additionally, 64% of the deals in Vietnam were valued at less than US$20 million. While 77% of the deals were domestic, Thai firms were the biggest foreign buyers in terms of value, enacting aggressive takeovers of major Vietnamese firms in retail and consumer goods. In terms of quantity most deals came from Singapore and Japan.

 

With advantages of proximity in terms of geography, culture, and climate, Thai firms have sought to penetrate the growing Vietnamese market quickly. Alongside other neighbouring nations who have struggled as their home markets mature, they have increasingly sought high-growth or low-production-cost economies for expansion elsewhere.

 

There is a lot to celebrate, but the total value of M&A activity reached just US$1.1 billion in the first quarter of 2017, a drop of 24.4 percent year-on-year. A slowdown in the State’s equitisation process is partially to blame for the drop, and many of the speakers at the M&A Forum expressed the need for a big push in the second half of the year.

 

Trains, planes and automobiles

 

To continue the high rate of economic growth achieved over the past few years, the Ministry of Planning and Investment (MPI) concluded that Vietnam is in dire need of M&A investment in the infrastructure sector. Deals need to come in thick and fast across many branches of the economy, with roads, railways, airports and seaports needing upgrades to meet international standards, in addition to the continued expansion of the country’s real estate and retail conglomerates.

 

As well as the increased divestments of State-owned enterprises, Vietnam’s administrative policy framework will need to be improved to attract and accommodate foreign investors.

 

Banking on big deals

 

Besides recent prime ministerial decisions regarding the SOE equitisation process, the government has made a priority of dealing with non-performing loans. This in particular could mean big news for M&A activity in the banking sector.

 

A resolution was recently adopted by the country’s National Assembly, with the State Bank of Vietnam (SBV) aiming to reduce the ratio of non-performing loans (NPLs) to below 3 percent by 2020. As part of the resolution, credit institutions, foreign entities and bad debt trading institutions will be able to buy and sell bad debts in an open and transparent way.

 

The move has had a positive impact on banking shares, and recent reports suggest that South Korea’s Shinhan Bank is poised to acquire a financial institution in Vietnam, following its takeover of ANZ Vietnam’s retail business. Two Japanese investors are also negotiating the purchase of stakes in two different Vietnamese financial institutions.

 

Moves like these show that foreign firms appreciate the potential of Vietnamese consumer finance, especially with attempts to unburden the system of its bad debt. StoxPlus, a leading financial and business information corporation in Vietnam, valued the market in 2016 at US$26.55 billion, with an annual growth rate of 30-40%.

 

Japan’s interest is good news for Vietnam’s budding financial sector, which could do with an injection of experience from more established players.

 

So, there is reason to be optimistic. However, participants at the M&A Forum stressed that foreign-ownership limits and the lack of clear regulations in areas attractive to big investors are still obstacles to fulfilling the country’s potential.

 

Dearth of details

 

Foreign investors often bring up the subject of transparency, which remains a big issue. The opaque investment environment can complicate negotiations in Vietnam, and this is particularly true when dealing with equitised state-owned enterprises. Investors are required to make substantial upfront commitments in terms of time and money at the early stages of the bidding process, shouldering significant risks to enter the market.

 

Used to dealing with more sophisticated operations, the financial statements of Vietnamese companies can also fall short of investors’ expectations. There is certainly a need for advisors and consultants, who can help with valuations and due diligence, offsetting some of the risk involved.

 

Until Vietnamese firms grow large enough to regularly participate in substantial cross-border M&A deals, foreign partners will need to make sufficient preparations when it comes to tax and legal requirements. Over time, Vietnamese companies will become more aware of the requirements set forward by investors in M&A transactions, which will generate more deal flow as well as shorten the transaction process.

 

Cause for cautious optimism

 

These complaints aside, the overall impression at the M&A Forum was positive, with some predicting that M&A activities in Vietnam would double or triple over the next five to ten years. With some adjustments it’s certainly possible to surpass 2016’s deal value in the short term, especially if the growth of the consumer retail sector continues to attract the attention of Korean investors. Raising the foreign-ownership limits in Vietnamese banks could also prove to be a tipping point for some big transactions.

 

To maintain momentum over the long term, however, more significant adjustments will be needed. The issues of equitising SOEs, state divestment and the foreign ownership cap will become more urgent as time goes on. The government will need to respond to suggestions and support legal reforms if the country is to attract more M&A capital. Crucially, the efficiency and transparency of the M&A market will need to be improved for foreign investors. Policymakers have promised that further legal reforms are underway and the government is pushing forward with state divestment. Let’s hope they keep to their commitments.

 

For more information about M&A in Vietnam, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

Risk and reward in Vietnam’s real estate as investors ignore uncertainty over future of land rights

Vietnam has emerged as an attractive destination for foreign investors looking to enter the real estate market. Driven by a fast-growing economy, high rate of urbanisation and expanding middle-class, cities like Hanoi, Da Nang and Ho Chi Minh City have become dynamic and lucrative metropolises. For those willing to shoulder the risks, the market offers substantial rewards and great potential over the coming decades.

 

Much of the development can be attributed to the implementation of the Land Law (No. 45/2013/QH13), Law on Housing (No. 65/2014/QH13) and Law on Real Estate Business (No. 66/2014/QH13), which effectively opened the floodgates to foreign investment in real estate.  In principle, these laws allow foreigners most of the same rights as locals when it comes to purchasing and owning real estate.  Many foreign development companies are jumping at the chance to develop new residential and commercial properties in one of the world’s fastest growing economies.  Question marks remain however over the underlying rights foreign-invested developers enjoy in the land on which these buildings sit and it remains to be seen how this will play out.

 

Lack of Certainty 

 

For many developers the country’s political landscape remains a hurdle. In Vietnam, land is collectively owned by the people, and administered by the State on their behalf. Under this system, property owners are denied full and legal ownership over the land. Their rights to the land are limited to ‘land use rights’ within the scope permitted by law.  A land user is issued a land use right certificate (LURC) that recognises the land user’s rights over the property.  There are different types of land use rights possible and some come very close to being analogous to freehold ownership as many would know it in the West (use right in perpetuity, subject to reversion and compulsory public works acqusitions, right to sell, transfer, mortgage etc).

Continue reading Risk and reward in Vietnam’s real estate as investors ignore uncertainty over future of land rights

Plenty of life in Vietnam’s M&A market despite bumps

Globally, 2017 has been an unpredictable year for the mergers and acquisitions (M&A) market, with the hangover of political and economic instability from 2016 inspiring caution among investors.

 

Foreign investment has been put on the back foot due to rising protectionism and the failure of promising free trade deals like the TPP (Trans-Pacific Partnership). Vietnam in particular has suffered and will need some big breakthroughs to regain lost momentum.

 

Although the TPP would have brought some big benefits to Vietnam, it is expected that other trade deals on the horizon will make up most of the shortfall. The nation has joined six regional FTAs as an ASEAN member, including the ASEAN Free Trade Area (AFTA) and the five FTAs between ASEAN and China, Japan, South Korea, India, Australia and New Zealand, as well as four bilateral FTAs with Chile, Japan, South Korea and the Eurasia Economic Union (EAEU). Negotiations over an FTA with the European Union (EU) have also been concluded.

 Sluggish start

 

Whereas 2016 was an exciting year for M&A in Vietnam, 2017 has gotten off to a slower start. According to a report released in advance of the M&A Forum (August 10, HCMC), deals in Vietnam hit an all-time record of US$5.8 billion in 2016, a growth of 11.92 percent compared to 2015. However, the market has slumped since the latter half of last year with fewer headline signings. The total value of M&A activity reached just US$1.1 billion in the first quarter, a drop of 24.4 percent year-on-year.

Continue reading Plenty of life in Vietnam’s M&A market despite bumps

Vietnam’s State-Owned Enterprises Equitisation and M&A – 6 July 2017 Presentation Slides

Slides from our recent presentation in Singapore on “SOE Equitisation and M&A – Recent Trends and Corporate Governance”.

Vietnam SOE Equitization and M&A-6 July 2017-Otto-ENG

For more information , please contact Manfred Otto at MOtto@duanemorris.com or any other lawyer you are regularly communicating with at Duane Morris.

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先日シンガポールで開催した「ベトナム国有企業の株式化とM&A~最近の動向とコーポレートガバナンス」についての日本語版プレゼン資料です。

Vietnam SOE Equitization and M&A-6 July 2017-Otto-JP

ご質問等ございましたら、オットー(MOtto@duanemorris.com)または弊所で通常連絡を取っている担当弁護士までご連絡ください。

 

明確化されたベトナムの物流会社に対する外国投資及びM&A

ベトナムでの外資系物流会社の設立と外国人によるベトナム人パートナーからの持分取得は、より明確なルールで進めることが可能となりました。ロジスティクス分門は、国際条約とベトナム国内法の施行の間に矛盾が生じて、多くの方々を悩ませていました。一方、ベトナム商工省(MOIT)は最近、より明確な施行規則(通達第 9911/BCT-KH号)、そしてホーチミン人民委員会やベトナム・ビジネス・フォーラム(VBF)に対する返答を含む、複数の公式文書を発行しています。同時に、日系物流会社はベトナムで100%外資で子会社を設立しました。

国際条約は国内法に優先する。MOITからのコメントもその基本原則を繰り返しています。従って、殆どの場合にはまず、ベトナムのWTOサービス・セクター・コミットメント(WTOSSC)を参考します。それにより、倉庫及びフォワーダーのような事業活動は100%外資での市場参入が可能ですが、コンテナ積降などの分野ではベトナム人の資本参加が必要です。

ベトナム流通分野の外資規制(WTOSSC)
CPC サービス分類 外国人保有比率
の上限
742 倉庫 100%
748 貨物運送代理 100%
749の一部 運送証券検査、貨物運送仲介、貨物鑑定、サンプル採取、重量判定、貨物の受取、受入、運送証明準備 99%
7211 海運(国内運送を除く顧客運送) 49%
7212 海運(国内運送を除く貨物運送) 51%
7221 内陸水路運送(顧客運送) 49%
7222 内陸水路運送(貨物運送) 49%
7111 鉄道運送(顧客運送) 未公約
7112 鉄道運送(貨物運送) 49%
7121 + 7122 道路運送(顧客運送) 49%
7123 道路運送(貨物運送) 51%
No CPC 通関 99%
No CPC コンテナヤード 100%
7411 コンテナ積降(空港でのサービスを除く) 50%
7512 配達(速配サービス) 100%
621, 61111, 6113, 6121, 622, 631 + 632 流通(輸出入、販売代理店、卸売、小売) 100%

M&Aにおける外国人買い手としては、購入価格やその他の条件に加え、絶対に不可欠なものと任意な事業内容をリストアップし、対象企業への出資比率の最良のケース及び許容範囲を考慮し区別しておくことをお勧めします。

ヤマト運輸及び佐川急便は、ベトナムで独資での子会社を設立しました。これは100%外資で可能な事業内容を戦略的に選別した上で可能となっています。

詳細につきましては、ジャイルズ・クーパー(gtcooper@duanemorris.com)、オットー マンフレッド 倉雄(motto@duanemorris.com) 、又はドウェイン・モリス法律事務所で通常連絡を取っている弁護士へご連絡ください。

More Clarity on Foreign Investment and M&A in Logistics Companies in Vietnam

Foreign investors can now proceed with more certainty when setting up logistic companies or acquiring stakes from Vietnamese partners. Logistics is an area where discrepancies between international treaties and domestic law implementation have caused many headaches. However, Vietnam’s Ministry of Industry and Trade (MOIT) has recently provided more clarity through a guiding regulation (Circular No. 9911/BCT-KH) and a number of official letters, including responses to the Ho Chi Minh City People’s Committee and the Vietnam Business Forum. At the same time, a few Japanese logistics companies have established 100% foreign-invested subsidiaries in Vietnam.

International treaties should supersede national law, and official comments from MOIT have restated that view. So, we initially refer to Vietnam’s WTO service sector commitments (WTOSSC) in most cases. Accordingly, some sectors are open to 100% foreign investment (e.g., warehousing and freight forwarding), while some still require Vietnamese equity participation (e.g., container handling).

Foreign Ownership Limitations in the Logistics Sector (WTOSSC)
CPC Service Description Max. Foreign Ownership
742 Storage and Warehouse 100%
748 Freight transport agency (incl. freight forwarding services) 100%
749 (partially) Bill auditing; freight brokerage; freight inspection, weighing and sampling; freight receiving and acceptance; transportation document preparation on behalf of cargo owners 99%
7211 Maritime transport (Passengers; less cabotage) 49%
7212 Maritime transport (Freight; less cabotage) 51%
7221 Internal waterways transport (Passengers) 49%
7222 Internal waterways transport (Freight) 49%
7111 Rail transport (Passengers) Unbound
7112 Rail transport (Freight) 49%
7121 + 7122 Road transport (Passengers) 49%
7123 Road transport (Freight) 51%
No CPC Custom clearance 99%
No CPC Container station and depot 100%
7411 Container handling (except at airports) 50%
7512 Courier (express delivery) 100%
621, 61111, 6113, 6121, 622, 631 + 632 Distribution (import/export, commission agents, wholesale, retail) 100%

As a foreign buyer in an M&A case, besides the purchases price and other conditions, we recommend to consider and differentiate between absolutely essential and optional business lines as well as the best case and acceptable levels of ownership in the target.

Yamato Logistics and Sagawa Express have established 100% foreign-invested subsidiaries in Vietnam. This is possible through strategically limiting business lines to those that are open to 100% foreign investment.

For further information, please  contact Giles Cooper (gtcooper@duanemorris.com), Manfred Otto (motto@duanemorris.com) or any other lawyer you are regularly communicating with at Duane Morris.