M&As in Vietnam’s banking sector have been relatively quiet in recent years but more deals appear to be on the horizon.
Vietnam’s crowded banking sector posted a busy fiscal 2017, with most local commercial banks reporting handsome business results and setting ambitious plans for 2018.
A few months after listing on the Ho Chi Minh Stock Exchange (HSX), the HCM City Development Commercial Bank (HDBank) posted impressive revenue of more than $37 million in the first quarter of this year, a three-fold increase year-on-year.
The bank’s annual general meeting (AGM) in late April saw consensus among shareholders over a plan to merge with the Petrolimex Group Commercial Bank (PG Bank), at a time when Vietinbank has withdrawn from a merger and acquisition (M&A) with PG Bank that was agreed upon in 2015.
The HDBank move has raised questions about other M&As in the local banking sector this year.
Few successful engagements
The M&A deal is in line with HDBank’s retail development orientation and service diversification to reduce its dependence on credit activities.
According to its roadmap, the merger will be completed in July this year after a certificate of public securities offering is received from the State Securities Commission.
HDBank is quite experienced in M&A activities, having merged with DaiABank and acquired 100 per cent of the SGVF consumer finance company in 2013.
In order to carry out the new merger, HDBank will issue a total of 300 million shares to secure 100 per cent of PG Bank’s charter capital.
Of this, 186.3 million shares will be issued as a swap for PG Bank’s shares at a ratio of 1/0.621, meaning that each PG Bank share is equivalent to 0.621 HDBank shares.
The remaining 113.7 million shares will be distributed to existing shareholders at a price of $0.44 each and will then be bought back for $0.57 by HDBank as treasury shares.
The partnership between HDBank and PG Bank astonished the local market, as the acquisition planning was implemented and completed within April.
Some financial experts have observed that the interchange rate will benefit PG Bank’s shareholders, as its shares are now valued at around $1.18 compared to a real value of about $1.
Despite being considered a “clean” bank, PG Bank’s charter capital has only grown negligibly in recent years and been stable at around $132 million.
http://english.vietnamnet.vn/fms/business/202638/moves-afoot-in-banking-m-as.html
