Japan's Mizuho Corporate Bank is expected to buy an up to 20 percent stake in Vietcombank, sources familiar with the matter told Reuters, in a deal worth more than $500 million, marking Vietnam's largest-ever inbound acquisition.


Foreign investment in Vietnam has seen an uptick of deals, with multi-national corporations, private equity and hedge funds scooping up stakes in companies, eyeing low valuations and high growth, despite a long list of risks.
Mizuho and its Japanese rivals including Mitsubishi UFJ Financial Group have been stepping up overseas expansion to seek growth beyond their home markets.
Two sources familiar with the matter confirmed that Mizuho was the chosen buyer and confirmed the size of the stake, though they did not confirm the purchase price. Twenty percent of the bank at its current market capitalisation is worth $520 million, excluding a deal premium. Another source familiar with the matter said on Wednesday that Mizuho would pay around 60 billion yen ($760 million).
The deal, expected to announced by the end of the month, comes three months after Kohlberg Kravis Roberts & Company. signed Vietnam's largest ever private equity deal with a $159 million stake in Masan Consumer Group.
At $520 million or more, the deal would mark Vietnam's largest-ever inbound acquisition from a foreign company, according to Thomson Reuters. Mizuho, a unit of Mizuho Financial Group, and Vietcom declined to comment.
The government of Vietnam launched the auction this spring and invited first round bids by late May, sources previously told Reuters. The process was expected to attract private equity firms as well, sources said at the time.
Foreign investors seeking to buy 15 percent or more of a state-owned bank must have total assets of at least $20 billion in the year before the purchase, Vietnam's central bank said earlier this year. Foreign ownership can be increased to 20 percent with government approval.
Mizuho's total assets stand at 160 trillion yen ($2 trillion) as of the end of March.
The government owns 90.7 percent of Hanoi-based Vietcombank, or Joint Stock Commercial Bank for Foreign Trade of Vietnam, the nation's second-biggest partly private bank by assets.
Credit Suisse was the bank assigned to lead the Vietcom bank stake auction. Credit Suisse also advised KKR in its Masan purchase. The bank declined to comment on Wednesday.
Foreign interest
An investment into Vietnam gives Mizuho access to an economy poised to grow at 7-7.5 percent in the next five years and a mainly young population of more than 80 million.
Over the past decade, Vietnam has emerged from the hangover of war to play a central role on Asia's factory floor, producing everything from footware to computer parts.
While an underdeveloped consumer market and strong growth has attracted foreign interest over the years, heavy currency, political and economic risks have also turned investors away. Compared to other developing countries in Asia, inbound deal volumes into Vietnam are low.
Mizuho's stake in Vietcom bank alone would make up roughly one-third of Vietnam's total M&A volume last year.
In addition to KKR, British spirits group Diageo plc and investment fund Mount Kellett Capital invested in Vietnamese companies this year.
HSBC Holdings Plc , Malayan Banking Bhd (Maybank) and Societe Generale each own 20 percent in a Vietnamese bank.
Several banks deals in Asia have fallen over on price differences, with sellers asking in excess of 3 times price to book, according to bankers involved with the deals and analysts. Vietcombank had a price to book value of 2.55 at the end March.
In an interview with Reuters earlier this year, Mizuho Corporate Bank CEO Yasuhiro Sato, who also became CEO of Mizuho Financial Group in June, said his bank plans to extend into Myanmar, Laos and Bangladesh as part of its Asia push.
But Japanese banks face a challenge to quickly establish themselves in the broader Asia market against foreign lenders such as HSBC and Standard Chartered .