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LAWYER IN VIETNAM OLIVER MASSMANN VIETNAM M&A IN 2016 AND 2017 OUTLOOK

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AWYER IN VIETNAM OLIVER MASSMANN VIETNAM M&A IN 2016 AND 2017 OUTLOOK

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LAWYER IN VIETNAM OLIVER MASSMANN VIETNAM M&A IN 2016 AND 2017 OUTLOOK

  1. 1. www.duanemorris.com ©2010 Duane Morris LLP. All Rights Reserved. Duane Morris is a registered service mark of Duane Morris LLP. Duane Morris – Firm and Affiliate Offices | New York | London | Singapore | Los Angeles | Chicago | Houston | Hanoi | Philadelphia | San Diego | San Francisco | Baltimore | Boston | Washington, D.C. Las Vegas | Atlanta | Miami | Pittsburgh | Newark | Boca Raton | Wilmington | Cherry Hill | Princeton | Lake Tahoe | Ho Chi Minh City | Duane Morris LLP – A Delaware limited liability partnership OLIVER MASSMANN - Partner, General Director DUANE MORRIS VIETNAM LLC VIETNAM M&A IN 2016 AND 2017 OUTLOOK 1
  2. 2. www.duanemorris.com AGENDA: • VIETNAM’S ECONOMIC OVERVIEW • MAJOR M&A TRENDS IN VIETNAM IN 2016 • UPDATES ON NEW INVESTMENT LAW, ENTERPRISE LAW AND THEIR IMPLEMENTING DECREES • FOREIGN EQUITY CAP LIFITED UNDER DECREE NO. 60/2015/ND-CP • VIETNAM’S RECENT INTEGRATION TO REGIONAL AND INTERNATIONAL ECONOMY 2
  3. 3. www.duanemorris.com3 WHICH COUNTRY HAS ITS TWO MAJOR CITIES RANKED AS MOST DYNAMIC CITIES ON THIS PLANET EARTH ?
  4. 4. www.duanemorris.com Welcome to the most dynamic country on this planet : Vietnam! 4
  5. 5. www.duanemorris.com Increasing Foreign Direct Investment 5
  6. 6. www.duanemorris.com Vietnam M&A during 2013-2016 6 Source: IMAA
  7. 7. www.duanemorris.com Deals overview in 2016 • Main foreign investors in M&A deals: Thailand, Japan, Korea, United States, and other European countries to prepare for the new trade agreements • Retail and real estate are the most attractive sectors to investors in terms of deal value • M&A in industrial goods, retail sector, consumer goods, real estate, agriculture sector, pharmaceuticals, technology … are also active. 7
  8. 8. www.duanemorris.com Notable M&A deals in Vietnam in 2016 • In April 2016, Central Group (Thai Group) bought BigC Vietnam at USD1.1 billion • TTC Holdings (Thailand) bought Metro Vietnam at USD710 million • In December 2016, Fraser & Neave ( a Singaporean beverage company) bought 5.4% of Vinamilk’s shares at USD500 million Note: Owner of Fraser & Neave is also owner of TTC Holdings • In January 2016, Mobifone bought 95% of AVG’s shares at USD400 million • In April 2016, Mirae Asset (a Korean securities company) together with AON BGN Investment Company (an UK company) bought Keangnam Hanoi Landmark Tower at USD350 million 8
  9. 9. www.duanemorris.com Main drivers of Vietnam M&A 2016 • New Investment Law and New Enterprise Law • Revision of foreign real estate investment • New FTAs (AEC, TPP, EU-VN FTA) 9
  10. 10. www.duanemorris.com INVESTMENT LAW, ENTERPRISE LAW AND THEIR IMPLEMENTING DECREES EFFECTIVE FROM 01 JULY 2016 10
  11. 11. www.duanemorris.com Definition of foreign investor • New Investment Law: Very simple definition! Foreign investor is any foreign individual or organization incorporated under foreign law doing business investment activities in Vietnam 11
  12. 12. www.duanemorris.com New Negative List! • All non-prohibited business activities are permitted “Investors are entitled to conduct business investment activities in industries and trades which are not prohibited by this Law.” (Art. 5.1, new Investment Law) • Removal of many baby permits • Reduction of conditional and prohibited activities –Old Law conditional activities: 386・prohibited activities: 51 –New Law conditional activities: 267・prohibited activities: 6 12
  13. 13. www.duanemorris.com Types of Foreign Invested Economic Organization (FIEO) under the new M&A procedures 13 A Offshore Investor F1 Company in Vietnam with 51%+ ownership by A F2 Company in Vietnam with 51%+ ownership by F1 F3 Company in Vietnam with 51%+ ownership by A and F1 F1, F2 and F3 are considered as FIEO and subject to investment requirements applicable for Offshore Investor Others: subject to requirements applicable for domestic investor
  14. 14. www.duanemorris.com14
  15. 15. www.duanemorris.com M&A procedures for foreign investors under new 2014 Investment Law • Appears to be simple!!! Only registration required, no more IRC  Satisfying the requirements for investment  Submitting application dossier  Assessment by the licensing authority and decision making after 15 days  Save up to 4-6 months • Subjects:  foreign investors making investment in conditional business activities for foreign investors;  F1, F2 or F3 holding 51% or more of the targeted economic enterprise after the M&A  Exclusion: Company other than F1, F2 and F3:  Registration to amend the ERC (for LLCs)  Notification of the change in foreign shareholders (for JSCs) 15
  16. 16. www.duanemorris.com16
  17. 17. www.duanemorris.com17
  18. 18. www.duanemorris.com FOREIGN EQUITY CAP LIFTED IN PUBLIC COMPANIES 18
  19. 19. www.duanemorris.com Rules on foreign ownership in a listed company • If Vietnamese law, including international treaties, provides for a specific ownership cap, the maximum foreign ownership (MFO) must not exceed such a cap. • If Vietnamese law treats a business activity as conditional on foreign investment (pursuant to the list of conditional sectors under the Investment Law) but does not yet provide any ownership limit, MFO must not exceed 49%. • If Vietnamese law provides ownership limit for public companies in specific business sectors (for example, 30% for banking), MFO must not exceed such limit. • If a public company conducts different business activities in which MFOs have been provided differently, the MFO will not exceed the minimum ratio specified in relation to the business activities which such company is conducting, unless otherwise stipulated in any applicable international treaty • In cases that do not fall within the above 4 groups, MFO can be up to 100%. 19
  20. 20. www.duanemorris.com Positive effects of the relaxed foreign equity cap • Foreign investors are no longer restricted from investing in public listed companies • More investment opportunities for foreign private equity investors to invest in majority stakes in companies. However, the Government still takes certain control over conditional business sectors where MFO is still limited in the Investment Law and the company’s charter (if any). • Enhance market liquidity and capitalization levels. • Easier to find strategic investors (lessons learned from failed IPOs of Vietnam Airlines and other big companies). • Accelerate companies’ restructuring and equitization of state- owned enterprises 20
  21. 21. www.duanemorris.com State-owned enterprises open up to foreign investors (Decision No. 58/2016/QD-TTg) Sectors in which the state will retain ownership of over 65% (there are 4 companies in total) include: • Operation management of airports; operating flight area services; • Navigation information services, surveillance, aviation meteorological services; • Mineral mining of large scale according to current regulations on classification of mine scale; • Exploration, development and exploitation of oil and gas mines; and • Finance and Banking (excluding insurance, securities and fund management companies, finance companies and financial leasing companies). 21
  22. 22. www.duanemorris.com State-owned enterprises open up to foreign investors (Decision No. 58/2016/QD-TTg) (cont.) Sectors in which the state will retain ownership of 50%-65% (there are 27 companies in total): • Production of basic chemicals; • Air carriage; • Enterprises whose market share is 30% or higher, having a role to ensure major balance of the economy and stabilize the market, operating in the following areas: a) Rice wholesale; – b) Focal petroleum imports. • Production of cigarettes; • Provision of telecommunications services with network infrastructure; • Growing and processing rubber, coffee in strategic areas, mountainous and remote area linked to national defense and security; • Enterprises ensuring basic needs for the development of production and improving material life, spirit of ethnic minorities in mountainous, remote and isolated area; • Electricity retail business (consistent with the formation and development of the electricity market levels).22
  23. 23. www.duanemorris.com VIETNAM’S RECENT INTEGRATION TO REGIONAL AND INTERNATIONAL ECONOMY 23
  24. 24. www.duanemorris.com TPP 24 Vs.
  25. 25. www.duanemorris.com TPP out – Impacts on Vietnam • US is the biggest trading partner of Vietnam in the TPP. Abolishment of the TPP will definitely cause Vietnam’s losing out of market access to the US. • However, TPP is not only about trade. It also sets out very high standards for business practices which will in turn prompt Vietnam to make reforms and increase competitiveness. • Whether there is TPP or not, Vietnam will continue the growth momentum as a result of an enhanced trading environment and increased access to markets. 25
  26. 26. www.duanemorris.com EU – Vietnam Free Trade Agreement (EVFTA) 26
  27. 27. www.duanemorris.com EVFTA – Comprehensive agreement • Trade in goods Market access for goods – tariffs Rules of Origin Export duties Technical Barriers to Trade (TBT) Sanitary and Phytosanitary Measures Customs and Trade Facilitation Administrative Cooperation in Customs Matters • Services and investment: National treatment Liberalisation commitments / market access Investment to state dispute settlement 27 Cross-cutting issues Dispute Settlement and Investment Dispute Settlement Government Procurement State Owned Enterprises & Subsidies Intellectual Property Rights Geographical Indications Trade and Sustainable Development Cooperation and Capacity building Annexes (car; green tech and pharma)
  28. 28. www.duanemorris.com EVFTA – High protection for investors • Improvement of intellectual property rights • Better access to EU’s third important trading partner - ASEAN • EVFTA secures a modern reformed investment dispute resolution standard – Investor-State Dispute Settlement (ISDS) – Independent International Tribunal will be competent to all conflicts about investment protection provisions (5 year transitional period for Vietnam) – A court of Appeal will be established – UNCITRAL rules on transparency in treaty-based investor-state arbitration are implemented which guarantees a high standard of juridical transparency – The decisions of the tribunal are enforceable and cannot be questioned by local jurisdiction 28
  29. 29. www.duanemorris.com WTO ANALYSIS OF LIBERALIZATION OF MARKET ACCESS • Typical restrictions: number of opened sectors, JV requirement, limits on foreign-owned shares, permission requirement Copyright Oliver Massmann - All rights reserved Country Limitation of market access* Country Limitation of market access* Malaysia medium Myanmar high Indonesia medium Cambodia medium Philippines medium Laos medium Singapore low India high Thailand medium China medium Brunei high Vietnam low
  30. 30. www.duanemorris.com Getting the deals done • Conduct a careful Due Diligence (including legal and financial) • Make sure all business lines of the target entity are transferred to the new entity upon the deal completion • Note that M&A activities are administered by the Foreign Department under the Department of Planning Investment and dossiers are subject to very strict examination 30
  31. 31. www.duanemorris.com M&A Outlook 2017 • Simplified M&A procedures under new Investment Law, relaxed foreign cap in listed companies, equitization plan and high protection for investors in the EVFTA will boost M&A process this year. • Start-up trends in Vietnam will drive more M&A, especially in technology sector • Planned IPO of Dung Quat Oli Refinery Plant and Electricity Generation Corporations (GENCOs) under the Electricity of Vietnam • Real estate sector will continue to see a number of M&A big deals, especially in sale and purchase of real estate projects (FDI in real estate sector in 2016 ranks No. 3, an increase of 12% compared with 2015) • There is great room for growth in the retail and consumer goods sectors. Modern trade channels such as supermarkets and convenience stores only account for less than 30% of sales, while the government targets a double number within the next 4 years. 31
  32. 32. www.duanemorris.com Questions & Answers 32
  33. 33. www.duanemorris.com DUANE MORRIS VIETNAM LLC Thank you very much! HANOI OFFICE HO CHI MINH CITY OFFICE Pacific Place, Unit V1307/08, 13th Floor, Suite 1503/04, Saigon Tower 83B Ly Thuong Kiet, Hoan Kiem District 29 Le Duan Street, District 1 Hanoi, Vietnam Ho Chi Minh City, Vietnam Tel.: +84 4 39462200 Tel.: +84 8 3824 0240 Fax: +84 4 3946 1311 Fax: +84 8 3824 0241 Contact email: omassmann@duanemorris.com 33
  34. 34. www.duanemorris.com References (1) 34
  35. 35. www.duanemorris.com References (2) 35
  36. 36. www.duanemorris.com References (3) 36
  37. 37. www.duanemorris.com References (4) 37

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