Vietnam Outpacing Asia as Investment Banks Chase State Deals

Investment-banking fees in Vietnam may jump at least 25 percent this year as the country’s government steps up a push to sell assets and foreign companies accelerate acquisitions, according to Credit Suisse Group AG.

Vietnam has defied a drop in investment-banking revenue elsewhere in Asia as the value of mergers rose to a six-year high in the first quarter. The VN Index has gained 29 percent this year in dollar terms, the third-biggest advance among 96 major stock benchmarks tracked by Bloomberg, as inflation eased and the government cut key policy rates to support growth.

“We think Vietnam is a market that has strong potential,” said Le Hoai Anh, head of Credit Suisse’s operations in the country, in an interview. The Zurich-based company started its investment-banking business in Vietnam in 2001.

The Vietnamese government has pledged to sell stakes in companies including Bank of Investment and Development of Vietnam as it follows China’s model of reducing state involvement in business. Meanwhile, eight straight months of easing inflation has helped attract foreign acquirers.

Investment-banking fees in Vietnam jumped 24 percent last year even as revenues in Asia fell almost 10 percent, according to New York-based researcher Freeman & Co. Still, Vietnam’s haul of $46 million is about a 10th of what Indonesia generates, Freeman data show.

“The reason why banks are still pitching and still spending time in Vietnam is not for $46 million,” said Chang Tou Chen, HSBC Holdings Plc’s head of investment banking for the Asia-Pacific region. “It’s for an investment in the future.”

Fish-Sauce Maker

KKR & Co. made the biggest private-equity investment in Vietnam’s history when it agreed to pay $159 million for a stake in fish-sauce maker Masan Consumer Corp. in April 2011. In September, the state-owned lender known as Vietcombank said it would sell a 15 percent stake to Japan’s Mizuho Financial Group Inc. for $567 million, marking the largest inbound acquisition in a decade.

Chang said he expects one or two acquisitions a year of more than $500 million involving Vietnamese companies. The country has seen two transactions in the past decade of that size -- the Vietcombank deal and ConocoPhillips’s $1.3 billion sale of its Vietnam operations to Perenco SA, data compiled by Bloomberg show.

“Vietnam, we sensed, represents a major opportunity, where we can be the bridge of providing international capital, expertise, and helping the government and domestic sectors,” said Rehan Anwer, a director at Credit Suisse’s Vietnam investment banking coverage team. Anwer estimated fees for the industry as a whole may rise at least 25 percent this year.

Stocks Slump

The VN Index slumped 9.4 percent last week, the biggest five-day drop in a year, as concern that Greece’s debt crisis is worsening weighed on emerging-market equities. Vietnam’s economic growth eased to 4 percent in the first quarter from 5.89 percent for all of 2011.

The State Capital Investment Corporation, which manages the Vietnamese government’s holdings in companies, plans to sell stakes in 254 businesses this year, according to its website.

Seven global investment banks showed up in January to pitch for work helping a state-owned company based in Hanoi sell a stake worth about $500 million, , chairman of Vietnamese investment firm Horizon Capital Advisers. Kham, who was at the meeting, didn’t name the company or the banks.

“It’s an exciting story,” said Brooks Entwistle, the Singapore-based Southeast Asia chairman of Goldman Sachs Group Inc. “We make sure we’re current, active, and involved in the most important situations in the country.”

New York-based Goldman Sachs has made about $120 million of investments in Vietnam since the early 1990s, including a stake in Internet gaming company Vinagame.

False Starts

Vietnam’s privatization program has stalled before. In 2007, State Capital Investment said Vietnam Airlines Corp. and Bank of Investment & Development of Vietnam were planning sales by the following year. Neither deal happened in that timeframe.

Bank of Investment, known as BIDV, eventually raised 1.58 trillion dong ($76 million) in an IPO in December and said in March it plans to sell a stake of as much as 15 percent to a foreign buyer this year. Vietnam Airlines will open bidding this quarter to choose an IPO adviser, local newspaper Dao Tu reported in April.

“Momentum will pick up in the country, it’s just a question of when,” said Brett Krause, Citigroup Inc.’s Vietnam head. “So much depends on public policy that will determine how quickly things will move.”

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