23. Are hostile acquisitions a common feature?

Hostile bids are neither defined nor regulated under Vietnamese law. There is also no express prohibition on this type of transaction. Recommended bids often outnumber hostile bids due to limited publicly available information about the target and reluctance to disclose information.

However, the number of hostile bids in Vietnam has been increasing since 2011, for example:

• Singapore-based Platinum Victory Ptl Ltd became Refrigeration Electrical Engineering Corp (REE)’s largest shareholder, accumulating a 10.2% interest in the company.
• Chile’s CFR International Spa acquired a 46% stake in healthcare equipment company Domesco Medical Import-Export Co (DMC), making it the first foreign deal in the pharma sector.

During 2010 and 2011, there were two takeover deals in Vietnam:

• The acquisition of Ha Tay Pharmacy in 2010.
• The acquisition of Descon, a construction company, in 2011. Binh Thien An Company acquired a 35% shareholding in Descon, officially took over Descon and made significant changes to its management body.

The Government’s Decree No. 155/2020/ND-CP lifted the foreign equity cap regarding public companies, with some exceptions (a 49% cap was previously in force). Specifically, the rules on foreign ownership in a listed company can be generally classified into the five following groups:

• If Vietnamese law, including international treaties, provides for a specific ownership cap, the maximum foreign ownership (MFO) must not exceed such a cap (group 1).
• If Vietnamese law treats a business activity as conditional on foreign investment (pursuant to the list of conditional sectors under the Investment Law) but does not yet provide any ownership limit, MFO must not exceed 50% (group 2).
• In cases that do not fall within group 1 and group 2, MFO can be up to 100% (group 3).
• In case a public company operates in multiple industries and trades with different regulations on the foreign ownership rate, the foreign ownership rate must not exceed the lowest level in the industries and trades with determined foreign ownership rates (group 4).
• Where a public company decides on the maximum foreign ownership ratio lower than the rate specified above, the specific rate must be approved by the General Meeting of Shareholders and included in the company’s charter.

This lift of the foreign equity cap can introduce more hostile bids in Vietnam.

24. What protections do directors of a target company have against a hostile approach?

There are no provisions regulating hostile bids under Vietnamese law.

25. Are there circumstances where a buyer may have to make a mandatory or compulsory offer for a target company?

It is mandatory for a tender offer to be made by any investor and its related persons (except investment funds and funds management companies) in the following cases:

• intention to purchase of circulating voting shares by said entities with no or less than 25% shareholding, which results in the direct or indirect ownership of 25% or more of the total voting shares of the company targeted for acquisition;
• intention to purchase of circulating voting shares by said entities with pre-existing 25% or more shareholding, which results in the direct or indirect ownership reaching or exceeding the 35%, 45%, 55%, 65%, and 75% thresholds of the total voting shares of the target company; and
• after a tender offer, if said entities have acquired 80% or more of the total voting shares of a listed company or outstanding fund certificates of a closed-end fund then it is mandatory to purchase the shares or fund being held by the remaining shareholders, unless all voting shares or outstanding fund have been bid for.

Author: Dr. Oliver Massmann

Email: omassmann @duanemorris.com