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Mergers and acquisitions: The flavour of the month
The world’s third largest steel maker, Korea’s POSCO, has announced the purchase of a 90 per cent stake in the Vietnamese operations of another Korean steel firm, the Asia Stainless Corp, from two major shareholders.
ASC, located in Dong Nai Province near HCM City, manufactures cold stainless steel sheets.
Daniel Choi, the president and general manager of ASC, did not disclose the value of the deal, but noted "it is a win-win deal for both ASC and POSCO" since POSCO could increase its stainless-steel market share while securing a more advantageous position in the market against Thainox of Thailand, which has the largest stainless steel cold rolling production capacity in Southeast Asia. ASC can focus mainly on producing stainless-steel end products using high-quality stainless cold rolled steel supplied by POSCO.
The French oil and gas group Total disclosed recently that it had reached an agreement with the US’s ExxonMobil to acquire ExxonMobil’s lubricants and specialties business in Viet Nam. The latter has a lubricant blending facility in Dong Nai and a lubricants distribution network in the country.
Total expects to significantly increase its market share and achieve a leading position in the lubricant business in Viet Nam thanks to the acquisition. The transaction is, however, subject to approval by relevant authorities and authorisation required by law.
VinaCapital Group, a Viet Nam-focused asset management, investment banking, and real estate firm, sold its entire stake in the Hilton Hanoi Opera Hotel, a five-star, 271-room hotel located in the centre of the capital.
The identity of the buyer and the value of the deal are not known but the company claimed that the sale had provided it a return on investment of 23 per cent over the three years since it acquired the stake.
"We are extremely satisfied to exit this asset at a value that is about 10 percent above its March 2009 book value," VinaCapital’s managing director of hospitality Stephen O’Grady said.
"We believe this is a clear indication that despite the global slowdown in the hospitality industry, high-quality properties in Viet Nam remain very attractive for both domestic and international buyers because of their strong long-term value."
Speaking recently on the prospects for mergers and acquisitions (M&A) in the 2009-11 period, an expert said companies that accelerate growth, expand to segments adjacent to their core business, or increase focus on their core business would contribute to M&A deals. He expected the global economic recovery to be another positive factor.
But there are some factors that deter M&A transactions – like the lack of familiarity with the due diligence process for Vietnamese vendors, incomplete or poor financial information, high valuations or valuations with no clear basis, and lack of understanding of the local business culture by foreign investors.
Gold rises to record high
World gold prices reached an all-time high of US$1,058.50 per ounce last Thursday, pushing domestic prices past the VND23 million (US$1,292) mark, for a tael-almost VND1 million up from the previous week. The rise is attributed to forecasts of major currencies continuing to fall, causing inflation concerns.
Gold prices began to edge down on Friday after Asian countries, including Viet Nam, tried to hold the value of their currencies down to make their exports competitive. SJC gold fell to VND23.09 million.
Gold trading company Sacombank-SBJ said on Saturday that the dollar’s rise had an impact on gold prices which closed the week at $1048.
Deutsche Bank has forecast the metal to go past the $1,100 level next year. US financial group Universal Coin&Bullion has said it will trade at $1,200 – 1,500 within nine to 12 months. Watch this space.
Customers demand innovation
The Government has been calling on people to prioritise Vietnamese goods and on manufacturers to improve product quality and customer service.
A recent report from auditing and consultancy firm Grant Thornton International reveals that customers are now the leading source of innovation for businesses globally. No longer simply passive recipients of goods and services, customers are shaping the future of their own consumption. When asked to name the origin of the best innovation ideas, business owners globally named customers (41 per cent) followed by heads of business units (35 per cent), employees (33 per cent), and in-house research and development teams (33 per cent).
In the Asia-Pacific, customers are a particular source of innovative ideas and products with 48 per cent of businesses citing customers as the source of the best ideas, compared with 40 per cent in Western Europe and 35 per cent in North America.
Open innovation – where ideas and information are shared with a third party – is seen as the key to future growth, with 33 per cent of businesses globally having successfully applied it and planning to continue it.
Innovation in general is regarded as a top corporate priority by more executives in Western Europe (41 per cent) than in North America (33 per cent) or the Asia-Pacific (31 per cent). In addition, North American firms appear more inward looking when describing their policy towards investing in innovation over the next two years, with just 49 per cent of respondents citing innovation as a means to explore new markets. This compares to 63 per cent in both Western Europe and Asia-Pacific.
Only 22 per cent of Asia-Pacific respondents cited product innovation in isolation as successfully increasing profitability, with China recording the highest rate of 32 per cent. In Viet Nam it was 18 per cent while Thailand recorded the lowest rate of just 9 per cent.
"Businesses will need to pay more attention to what their customers are saying and listen to their ideas for innovations," noted Kenneth Atkinson, managing partner of Grant Thornton Vietnam.
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