VN set for landmark merger

VN set for landmark merger

Military Bank Securities will seek approval for its merger with another securities firm, VITS, from its shareholders at a meeting on Thursday.

VITS shareholders have already given approval.

If the merger goes through, it will be the first between two securities firms in Viet Nam.

According to MBS vice chairwoman Cao Thi Thuy Nga, the merger is a step in the process of restructuring her company to maximise its advantages.

"The MBS executive board has decided on the VITS deal based on the desire of both companies," Nga, who is also deputy general director of Military Bank, said.

Others factors include the low financial risk of VITS and its small, neat operational model, which would make the integration easier, she said.

While MBS is an affiliate of the Military Bank, VITS is a member of the diverse VIT group whose activities include property, financial investment, and communications.

MB Bank, the biggest shareholder in MBS with a 65 per cent stake, has decided to convert into equity convertible bonds worth VND600 billion (US$28.38 million) issued by the latter to increase its ownership to 75 per cent.

Nga also said if her company's shareholders approve the merger, the new company would be called MBS.

Meanwhile, its recent acquisition of Western Bank served PetroVietnam Finance Company's goal of becoming a commercial bank.

PVFC could have applied to the State Bank of Viet Nam for status change, but chose the merger with Western Bank deciding that would be simpler.

The preparations for the merger began last year, with several PVFC executives moving into high positions at Western Bank and jointly working on the merger plan.

Both companies had high bad debt rates – 4.5 per cent for PVFC and 6.84 per cent for Western Bank – last year.

But Western Bank's debts are mostly backed by assets and borrowers have promised repayment.

The combined bad-debt rate is expected to be 4.2 per cent by the end of this year.

Nguyen Dinh Lam, chairman of PWcombank, the new entity, said [unlike PVFC] the new bank could offer payment services.

It has the advantage of being part of the giant PetroVietnam group of companies and their massive financial transactions, and Lam said even a piece of this cake would be enough for the bank's survival.

John Ditty, chairman of auditing and consulting firm KPMG Viet Nam&Cambodia, said the first thing to do in a mergers and acquisitions deal is finding the right target and the factors to look for in a target include management quality, similar strategic vision, and strong growth potential.

Kenneth Atkinson, managing partner of Grant Thornton Viet Nam, said: "M&A can be enormously beneficial for parties on both sides of the deal. Sellers can reap the fruits of their lifetime of hard work, and buyers can gain key strategic advantages that will catapult them to a new level.

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