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Developers merge to weather crisis
During the past eight months, many mergers and acquisitions (M&A) activities between property developers have occurred in Ha Noi and HCM City. Experts said that this trend was necessary to bail out the market in the face of the global and domestic economic crisis.
The local CT Group announced its purchase of Thien Loc Investment Co Ltd on August 16 and officially became an investor in an apartment project with total area of 5.900sq.m at Pham Van Chieu street, Go Vap District, HCM City. The real value of the acquisition was not disclosed.
CT Group also acquired a 95 per cent stake in Cu Chi GS Development Co Ltd, worth US$24 million, and became the new developer of the CT Sphinx Golf Club&Residence project.
In early August, Vina Properties Development Group purchased the Novotel Phan Thiet Ocean Dunes and Golf Resort complex in central Binh Thuan Province. After the commercial affair, the project was renamed DuParc Phan Thiet Ocean Dunes&Golf Resort.
Ha Noi Electronics Corp (Hanel) acquired a 70 per cent stake in South Korean corporation Daewoo in the first quarter of this year. The value of the transaction was also not disclosed by the two partners.
Commercial banks also acquired property projects. An anonymous joint stock commercial bank has been completing procedures to buy a trade centre with total area of 1,200sq.m in Cua Nam Street, Ha Noi.
No more details about the acquisition were unveiled as the procedures are ongoing. An expert said that another international retail group also wanted to purchase a trade centre in Ha Noi but could not speak more about it as negotiations were underway.
The Singapore company Keppel Land made a joint venture with Hung Phu Company to build an apartment on an area of 9.8ha along Rach Chiec River, District 9, HCM City. In addition, Keppel Land also negotiated with the domestic Novaland Group to develop a residential area at District 9.
Deputy director of Ha Noi Savills Tran Nhu Trung said M&A procedures had recently been simplified. Now investors had more opportunities to select projects because property developers faced difficulties, especially financial ones.
"Buyers usually offered more stringent requirements on location, effectiveness and profitable capacity before making a decision," Trung said.
Dang Van Quang, director of the Navigat property company, said that in the face of the global and domestic economic recession, a lot of developers lacked capital so they had to sell assets and seek out partners to embark on joint ventures.
Quang stressed that almost all real estate developers were afraid of bad reputation that they would suffer losses or even bankruptcy and that there would also be negative psychological impacts for employees if they published information about M&A deals.
"Almost all the M&A information is kept quiet during the negotiation process until an agreement is reached," Quang said.
Francis Hung, director of Fresh View Training and Consulting Co Ltd, claimed that M&As or other alliances were necessary as the business restructuring would have a positive impact on the health of businesses. This was a good chance for powerful firms to hunt for good investment opportunities, while smaller ones could deal with capital shortage, recover capital or withdraw capital from the projects.
Hung added that the M&A process usually took more time than in other sectors because legal procedures and price appraisals were more complicated. If the M&A succeeded, the affairs would not only benefit the developers but also home-buyers.
Therefore, property prices would be adjusted back to practical prices that satisfied requirements of the demanders. The real estate transactions would depend on an economic recovery, he said.
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