VietNamNet Bridge - Ninety percent of 2,000 plastics companies are small and medium sized, and have problems in capital and technology access. This gives foreign investors an opportunity to acquire companies to penetrate Vietnam's promising market.

The State Capital Investment Corporation (SCIC) has announced it will divest shares in 10 big profitable enterprises, including two plastics manufacturers – Binh Minh and Tien Phong. 

The move, along with the new policy on allowing foreign investors to hold up to 100 percent of stakes in Vietnamese enterprises, according to analysts, will ignite a new merger & acquisition (M&A) movement in the plastics industry. 

Tran Viet Anh, general director of Nam Thai Son, confirmed that many foreign investors are negotiating taking over Vietnam’s plastics companies. He said at least four companies have sold stakes to foreigners, while Thai investors want to buy 100 percent of stakes in the companies they are eyeing.

According to MB Securities, foreign investors now accept to pay 10-20 percent higher than the current market prices for shares after information about the lifting of foreign ownership ceiling was released.

SCG, a big company from Thailand, for example, wants to raise its ownership ratio in Binh Minh Plastics Company (BMP). The amount of money SCG has to pay if it buys BMP shares from SCIC will be not big for the investor, estimated at VND1.8 trillion, which is just a small part of the total sum of $5-6 billion the group plans to inject into M&A deals in Vietnam until 2020.

SCG has recently, through its subsidiary Nawaplastic Industries (Saraburi), bought 20.4 percent of BMP and 23.84 percent of Tien Phong Plastics (NTP). 

As BMP and NTP now hold 50 percent of the structural plastic pipe market share, SCG, with takeover deals, could easily implement its plan to dominate the structural plastics industry in Vietnam.

Recognizing the great potential of the Vietnam plastic packaging market, SCG has, through TC Flexible Packaging (TCFP), a subsidiary, bought 80 percent of stakes of Batico, a plastic packaging manufacturer, in a $44.4 million deal.

Batico is among Vietnam’s top five packaging enterprises which churns out 230 million square meters of products every year.

Besides the four companies, SCG also holds stakes in 18 other businesses in Vietnam, mostly chemicals, plastics and packaging.

Meanwhile, Nguyen Hoang Ngan, deputy chair and CEO of BMP, said Binh Minh was admitting the Da Nang Plastics Company in a plan to develop its production base in the central region.

Trinh Chi Cuong, a consultancy expert, noted that M&A deals in the plastics industry were inevitable as Vietnamese enterprises are small and weak, while foreign investors want to penetrate Vietnam more deeply to exploit the lucrative market.

DNSG