Chinese companies have taken part in four M&A deals, worth USD749 million, in Vietnam last year and they are trying to set more footholds in the market, a recent report said.

Chinese firms are trying to set more footholds in the Vietnamese M&A market

A report on M&A in Vietnam in 2012 by StoxPlus, a Vietnamese financial portal, said that Chinese firms have been increasing their foreign investment in recent years, including Vietnam. In 2010 Chinese businesses invested more than USD30 billion in foreign countries. Last year the figure climbed to USD42.9 billion.

In Vietnam, over USD4.4 billion in Chinese foreign direct investment went to Vietnam, exceeding Japanese firms, with USD2.4 billion and Singaporean companies who invested USD2.2 billion.

Chinese investment accounted for 30% of total FDI investment in Vietnam in 2011.

Chinese firms mainly invested in production and processing, construction and infrastructure in Vietnam, but they also pumped a lot of money into M&A in the country.

Vu Ba Phu, Deputy Director of the Ministry of Industry and Trade’s Competition Management Department, said that there have been several acquisition deals through stock purches or via a third parties recently, but that there have also been some cases of hostile takeovers.

Recently, Chinese Charoen Pokphand Group (CP Group) bought a 70.82% stake in CP Vietnam at USD609 million.

The takeover, according to analysis by StoxPlus, resulted in the Chinese group’s holding of 20% share in the Vietnamese animal feed market, 77% of the country’s pig feed market and 30% of its poultry feed market.

Economist Pham Chi Lan worried that the deal between China’s CP Group and CP Vietnam may increase the dependence of the domestic animal feed industry on China.

Meanwhile, the Ministry of Agriculture and Rural Development’s Animal Husbandry Department said that the country has to import half of its raw materials for animal feed production from foreign countries every year.

According to StoxPlus, more and more Chinese firms have bought stakes in Vietnamese firms recently, including SW Kingsway Capital Group’s purchase of 10% stake in VinaCapital for USD19 million, and China Investment Group’s taking over a 19% stake in Vietnam National Coal-Mineral Industry Group’s Mong Duong 2 thermal power plant in Quang Ninh Province.

Nguyen Quang Thuan, General Director of StoxPlus, said there are evidences that Chinese firms have been dominating several industries in Vietnam, mainly through FDI. Thuan predicted that there will be more Chinese activity when it comes to M&A in time to come.

Thuan called on Vietnamese authorities to take measures to ensure that all M&A deals are conducted in accordance with the country’s Law on Competition.

Though the participation of Chinese firms in M&A deals in Vietnam is fairly recent, there are many cases where they come out holding dominant shares in the market after the takeover.

The report also said that Vietnam recorded M&A deals worth USD6.6 billion in 2011, a four-fold increase from 2010, with 53% of the deals involving foreign companies.