MWG deal under scrutiny by competition authority
MWG deal under scrutiny by competition authority
Mobile World Group (MWG) has just announced completing the acquisition of a 95 per cent controlling stake in Tran Anh (TAG). However, MWG’s resulting market share, as the company already held 30 per cent before the deal, could cause legal issues, blocking the corporation’s designs of expansion.
The Vietnam Competition Authority under the Ministry of Industry and Trade has set its eyes on the mergers and acquisitions (M&A) deal between the two largest local electronic retailers—MWG and TAG. Based on the acquisition documents and collecting opinions from similar businesses in the market, the authority defined that MWG’s market share of IT products before the acquisition was over 30 per cent.
According to Article 18 of the Law on Competition, an ‘economic concentration’ is prohibited if the combined market share of the two participating enterprises is more than 50 per cent.
The department said it will continue to oversee the activities of MWG in the retail market for household electronic devices and IT products to detect any abuse of its dominant position in accordance with the law.
Regarding the process of this deal, a representative of MWG said that the transaction has been finished and company leaders have started taking part in Tran Anh’s supermarket operations in October 2017.
Tran Anh’s revenue was VND2.4 trillion ($105.5 million) in the first nine months of 2017. They expect to hit over VND4 trillion ($176 million) in 2018. The merger of Tran Anh and MWG will increase MWG’s scale to become the biggest retailer in the country and raise the business efficiency of Dien May Xanh, Tran Anh, and their suppliers.
MWG said that the two companies’ total retail market share was over 30 per cent at the time of the merger. The Dien May Xanh retail chain is popular nationwide but needs to rise its presence in Hanoi and big northern cities. Meanwhile, Tran Anh is a popular retail brand in the region with 34 large-scale electronics supermarkets in prime locations.
First, MWG will maintain the name Tran Anh but customers will enjoy MWG-standard after-sales policies and service quality.
Several days earlier, the MWG Board of Management approved buying 23.6 million shares, equivalent to 95.2 per cent of Tran Anh’s charter capital. Thereby, MWG acquired the shares of nine shareholders, including 7.7 million shares from Nojima Corporation (equivalent to 30.9 per cent of the charter capital), 10.9 million shares of Tran Xuan Kien and his wife (44.2 per cent), and six other shareholders.
In case the authority finds that MWG and Tran Anh together hold more then 50 per cent of the home electronics and IT products market, the deal would violate Article 18 of the Law on Competition, essentially negating its legality and causing heaps of trouble for both companies forced to revert changes.
