As world-wide business activity comes to a standstill and Covid-19 dominates global headlines, it is easy to overlook other developments and business deals that are still ongoing.
In recent weeks, Access Asia Group has been following a number of deals involving Thai acquisitions and investments in Vietnam, where containment of Covid-19 has been a rare success story. While several Southeast Asian countries – including Thailand – face likely economic contraction due to the pandemic, Vietnam is still on a notable growth trajectory, projected by the Asia Development Bank (“ADB”) to record one of the highest growth rates in the region despite the country’s proximity to the initial epicenter of today’s global pandemic, China.
“The economy’s fundamentals remain resilient [and the] drivers of economic growth – a growing middle class and a dynamic private sector – remain robust,” the bank said it in its flagship annual economic publication, Asian Development Outlook 2020. “The large number of bilateral and multilateral trade agreements Viet Nam participates in, which promise improved market access, will help the country’s economic rebound.”
Meanwhile in Thailand, a range of both adverse and favorable factors, reflective of both economic maturity and economic stagnation, are pushing Thai companies to look abroad. And Vietnam is among the most favored regional destinations for outbound Thai investments, as highlighted in a series of recent deals.
Siam Cement Acquires Bien Hoa Packaging
Attracted by the growth of online shopping due to Covid-19 shutdowns, Thailand’s largest cement company, Siam Cement Group (“SCG”) is acquiring Bien Hoa Packaging Joint Stock Company – a leading supplier of carton packaging in Vietnam. The deal will be through a joint venture with Japanese cardboard maker Rengon Co., Ltd.
Like a number of Thailand’s conglomerates, Siam Cement has been actively expanding in Southeast Asia to tap better growth rates, reduce production costs and capitalize on the Thai baht’s strength. Vietnam has been among the favorite markets for Thai expansion, where economic growth is pyramided with political stability and favorable demographics – including a rapidly growing middle class and a highly productive and abundant pool of skilled and semi-skilled labor.
While this deal is going ahead despite the global Covid-19 crisis, the pandemic did force an SCG subsidiary, SCG Packaging, to postpone its USD 1 billion initial public offering (IPO), which was initially set to occur in the first half of this year.
Stark Corporation Acquires Thinh Phat Cables and Dong Viet Non-Ferrous & Plastic
Another recent deal that has gone under-reported is the ensuing acquisition of Vietnam’s Thinh Phat Cables and Dong Viet Non-Ferrous & Plastic by Thailand’s Stark Corporation for a total value of USD 240 million. This is the largest inbound private-sector industrial transaction in Vietnam in the last three years, according to the financial advisor for the deal, BDA Partners, and “reflects the continued attractiveness of the Vietnamese domestic market, and Vietnam’s strong regional position within ASEAN.”
Stark Corporation is a publicly-listed investment holding company that focuses on investment in manufacturing and services in the industrial sector; its core subsidiary, Phelps Dodge International (Thailand) Co Ltd, is a leading wire and cable manufacturer.
Focus on Energy
Meanwhile, in late March Thailand’s Super Energy Corporation announced it will invest USD 457 million in four solar power plants in southern Vietnam. These are all projects implemented in Binh Phuoc province – Loc Ninh 1, 2, 3 and 4 – invested by Hung Hai Group, a relatively obscure Vietnamese company primarily engaged in hydropower, mining, construction, and real estate. Super Energy is one of many recent foreign forays into Vietnam’s attractive and lucrative renewables energy sector. Among these are Thailand’s B.Grimm Power, which brought two major solar projects into operation in Vietnam last year and is eyeing further investments.
Wind and solar in Vietnam already provide 10% of the country’s power – and 10 years ahead of schedule. Both renewables are expected by analysts to continue to eat into scheduled coal energy production in the years ahead regardless of the current pandemic-related global economic crisis as Vietnam stays on track to find the cheapest sustainable solutions to long-term local electricity demand.