Several foreign investment funds have recently announced intentions to become major shareholders of some listed companies, raising fears that these funds are positioning themselves to carry out hostile takeovers during the market downturn and resulting period of depressed share prices.
Refrigeration Electrical Engineering Corp (REE) earlier this month reported that Singapore-based Platinum Victory Ptl Ltd has became its largest shareholder, accumulating a 10.2-percent interest in the company.
In the second quarter, Chile’s CFR International Spa bought a 46-percent stake in healthcare equipment company Domesco Medical Import-Export Co (DMC).
Thailand’s Nawaplastic Industries (Saraburi) Co also announced in March plans to become a major stakeholder in Binh Minh Plastics (BMP) and Tien Phong Plastics (NTP). Analysts of Bao Viet Securities Co said the Thai company, which holds about 50 percent of the PVC pipe market in Thailand, wanted to stake out Vietnam’s market through acquisition of major stakes in these two leading Vietnamese plastics companies.
Analysts worried that a hostile takeover is likely since most of MBP’s and NTP’s shareholders are organisations and investment funds that will likely sell their shares if the price is right.
However, most of the recent large deals are aimed at financial investment purposes or at forging strategic partnerships within the same industry and are unlikely to result in takeovers, said the director of Viet Capital Securities Co’s financial consulting division, Dinh Quang Hoan.
Current law still only allowed foreign investors to buy up to 49 percent of the total shares of a listed company, with the remaining 51-percent seen as a shield to protect domestic investors, Hoan said
Nevertheless, other M&A experts have said that in such key sectors as pharmaceuticals and foodstuffs, foreign investors can get around the 49-percent barrier by encouraging their “backyard” domestic investors to increase their stakes.
After spending more than $60 million to acquire a 10-percent stake in software giant FPT last year, Singapore-based Orchid Fund increased its holdings to over 11 percent this month through the purchase of another 2.7 million shares.
As one of the top 10 leading shares by market capitalisation on the HCM Stock Exchange, FPT shares often sought by foreign investors. In addition to the Orchid Fund, US-based Red River Holdings now holds a 5.5-percent interest in FPT and has been trying to increase its holdings since early this year.
Both funds are also major stakeholders in other major listed companies. Orchid Fund owns a 3.9-percent stake in food processor Masan Group (MSN), while Red River Holdings currently maintains a 3.6-percent interest in steelmaker Hoa Phat Group (HPG) as well as 10-percent stakes in real estate and food and beverage companies.