Business cross-ownership creates messing playing field
Business cross-ownership creates messing playing field
Cross ownership turns out to be not only a problem of the banking system as complex connections have been found in many other business fields.
The merger and acquisition (M&A) deal between the Bien Hoa and Ninh Hoa Sugar JSCs, for example, has been a hot topic in local newspapers.
There are many reasons that prompted Bien Hoa to buy Ninh Hoa.
However, the most important reason is that Ninh Hoa has abundant material supply sources and stable markets which Bien Hoa covets.
It is expected that after the merger, Bien Hoa will have a material growing area twice as large as it has now – 23,500 hectares. This will give Bien Hoa a great advantage when competing with other sugar companies because it is the vital factor for an agricultural producer. It helps improve productivity and minimize costs.
However, the most noteworthy part of the merger deal is not the future of Bien Hoa, but the name of the buyer, Thanh Thanh Cong Group founded by Dang Van Thanh family.
Thanh is known as the founding shareholder of Sacombank, the biggest joint stock bank in Vietnam. After resigning from the post of Sacombank’s President, Thanh and his family members poured their big money into the sugar and sugar cane industry.
Thanh Thanh Cong has invested in nearly 20 sugar companies, including the listed ones, Thanh Thanh Cong Tay Ninh Sugar Company (SBT), Bien Hoa (BHS), Ninh Hoa (NHS) and Gia Lai Sugar & Thermopower JSC (SEC).
The four companies alone accounted for 81 percent of the capitalization value of all the sugar companies listed on the bourse.
Observers commented that the Dang family now controls sugar production in Vietnam, especially in the south.
Like Thanh Thanh Cong in the sugar industry, Hung Vuong Seafood (HVG) is a “big guy” in the seafood sector which has relations with many other companies in the same field such as Agifish, where it holds 74.89 percent of stakes, Sao Ta Food JSC (41.76 percent) and Tac Van Seafood Processing Company (25 percent).
HVG has recently bought the shares of the Viet Thang Animal Feed Company in large quantities in its plan to organize a close production process.
The “cobweb” of ownership relations can be most clearly seen in the civil engineering sector with the existence of the “Song Da family” or “PetroVietnam family”, i.e., the group of companies where the Song Da Corporation and PetroVietnam invest in.
PVX of the “PetroVietnam family”, for example, holds stakes in a series of companies in the same business field such as PVA, PFL, PTL, PVV and PVL. Meanwhile, Song Da Corporation holds controlling stakes in a series of subsidiaries SD5, SD6, SD10 and SJS, while the subsidiaries themselves hold each others’ stakes. SD5, SD6 and SD10 all have their shares in SJS.
Experts have warned that cross ownership gives Thanh Thanh Cong too much power, and that it would create a monopoly and allow it to control selling prices.
They have also warned that the overlapping connections in business ownership will bring high risks because businesses can exploit the situation to conduct transfer pricing and tax evasion.
vietnamnet
