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M&A boom greatly influence retail market

12 November 2015
Thoi Bao Kinh Doanh - Intellasia

The wave of carrying out mergers and acquisitions (M&A) in retail sector is increasingly exciting. This is the fastest way applied by many foreign retailers to dominate and resegment the market of Vietnam.

According to statistics of the Ministry of Industry and Trade (MOIT), the modern market share of Vietnam has only accounted for 25 percent of the total retail sales. There are approximately 724 supermarkets and 132 shopping centers nationwide. The number of convenient stores which have brand names and operate in chain is only counted in a couple of hundreds.

MOIT stated that there are over 20 foreign retail enterprises doing business in Vietnam. While domestic retailers are mainly small-scaled with various difficulties in distribution system and in governance capacity and linkage, foreign enterprises are the giants having large capital sources and advantages to expand the premises, thus they can easily acquire the retail market of Vietnam.

Once setting foot in Vietnam market, foreign giants began to set plans to expand and acquire the market. According to the South Korean retailer Lotte Group, by 2020, it aimed to open 60 supermarkets in Vietnam by 2020. The Auchan Group from France and Aeon Group from Japan also confirmed to expand the retail market in Vietnam with a total of 40 supermarkets and shopping centers via different methods, in which conducting M&A is the most popular one.

Most recently, at the opening ceremony of Aeon Mall Long Bien, representative of Aeon Group shared that in late 2014, Aeon Group acquired 49 percent share of Citimart and 30 percent share of Fivimart, and based on their 20 years of experience in the retail market to understand the culture and lifestyle in Vietnam.

Particularly, many people are surprised by the attractiveness of Aeon Mall Long Bien to the customers since its opening. According to Aeon representative, since the opening day, the mall has become a hot spot in Hanoi, with an average daily visitors of more than 90,000. By the end of November 7th (11 days after the opening), the mall has welcomed over one million visitors. Thus, by contributing capital in the experienced units in retail sector to penetrate Vietnam market, Aeon promises to be a redoubtable name in the Vietnam retail market in the future.

Carrying out M&A to acquire the retail market in Vietnam is not a new method. Before Aeon, many foreign retailers have chosen this solution. The French Auchan Group, rival of big names such as Wal-Mart, Carrefour, Lotte, Metro, and BigC, etc., has signed strategic cooperation agreement with Military Petrochemical Joint Stock Company (MIPEC), and along with that, the contract to rent the premises in MIPEC Long Bien has also been signed. Thus, Auchan Group has officially entered Hanoi market and started the plan to launch a chain of retail supermarkets named Simply Mart in the northern region. The new supermarket has an area of 3,700 square meters, and locates in MIPEC Long Bien Shopping Mall. As planned, the Simply Mart in MIPEC Long Bien will officially go into operation in 2016, at the same time with the handover of MIPEC Riverside project to apartment buyers. Simply Mart Long Bien supplies from 1,000 to 4,500 kinds of household products to consumers in Hanoi.

Gilbert Infantes, member of the Management Board of Auchan Group said that the group will continue to expand the chain of Simply Mart and will cover the northern region with 20 supermarkets by 2020. At the same time, in the southern region, Auchan group has cooperated with C.T Group to develop a chain of S-Mart and is also planning to develop a chain of Simply Mart in the region from 2016.

Lotte Group has suddenly announced to take control of the Diamond Plaza Trade centre by owning 70 percent of its stake. According to Hong Won Sik, general director of Lotte Vietnam Limited Company, conducting M&A is the method Lotte uses to develop in Vietnam, through its retail models which are similar to the investment strategy of Lotte Market in China and Indonesia.

Not only foreign retail giants uses M&A to penetrate in the market, in the domestic, Vingroup has also been using M&A to enter the retail market. On October 26th 2015, Vingroup has acquired 100 percent stake of the Maximark supermarket chain from An Phong Investment Joint Stock Company. This move drew much attention of the public, especially when its negotiation and completion process only lasted for two weeks. Previously, in October 2014, Vingroup officially acquired 70 percent stake of Ocean Group’s retail and real estate businesses, and the Ocean Mart chain was renamed Vinmart. In 2015, Vingroup continued to take over 100 percent stake of Vinatexmart of the Vietnam National Textile and Garment Group (Vinatex) at a total value of 229.5 billion dong. With this deal, Vingroup has own the entire Vinatexmart chain with 39 units. Vingroup also acquired 80 percent state (equivalent to 245 billion dong) of Hop Nhat Vietnam Corporation and changed the name to Vinlinks, aiming to develop freight and express delivery services for the group especially members in retail segment.

Previously, the Thailand Berli Jucker (BJC) also acquired of Metro Cash & Carry and took over the Phu Thai Group with the Family Mart chain from 2013. In electronics retail sector, the Central Group from Thailand purchased 49 percent stake of Nguyen Kim, and Nojima Group from Japan acquired nearly 31 percent stake of Tran Anh.

Those M&A deals promise to resegment the retail market in the future, with participation and competition of many foreign giants.
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