Eximbank-Sacombank merger to be Vietnam's largest M&A deal to date

The combined entity would have a market cap of about USD2b.

According to Maybank Kim Eng, EIB owns 9.6% of STB but is thought to lead a group of investors who control well over 50% of STB’s outstanding shares.

Here's more from Maybank Kim Eng:

This widely-expected merger was recently announced in a five-year cooperation plan between the two lenders. If realised, it will be the largest M&A deal to date in Vietnam and will wrap up the STB takeover story.

Vietnam’s banking sector is currently undergoing consolidation because there are too many banks in the country, but that consolidation is happening via mergers among smaller banks, and eventually some of the larger banks will probably absorb the weaker, small banks.

We do not view this EIB-STB merger to be part of that process. This merger will be a straight take-over between two comparable banks, as evidenced by that fact that STB’s former CEO and several board members were ousted last year.

The combined entity would have a market cap of about USD2b at today’s stock prices, thus putting it into a comparable market-cap range as the large state-owned commercial banks which have traditionally commanded higher valuations than private sector banks in Vietnam.

That valuation gap is attributable to the appeal of higher market-caps and liquidity to “top-down” investors in the country.

Impact on major shareholders. Post-merger, the percentage ownership of EIB’s foreign strategic partner Sumitomo Mitsui Banking Corporation (SMBC) would fall from 15% to 8%, but SMBC announced that it will inject more funds into the merged bank to maintain its stake holding at the current level.

On STB’s side, it has said it will reserve 15% of its outstanding shares for a potential foreign strategic partner – widely expected to be SMCB. In this scenario, it would be more likely that SMCB will plough funds into the merged entity rather than into STB per se.

Note that current regulations do not allow foreign banks to be strategic partners with two local banks at the same time.