Electronics retailer Tran Anh Digital World Company (TAG) is seeking its shareholders’ approval to sell a 25 per cent stake to Mobile World Investment Corporation (MWG), paving the way for a merger into the latter company.

The company’s existing shareholders are expected to send their feedback before the end of this month.

The share sale has confirmed recent speculation around the merger and acquisition (M&A) between Mobile World and Tran Anh Digital.

On Wednesday, shareholders of Mobile World Investment Corp gave their nod to increase the company’s new budget for M&A activities to VND2.5 trillion (over US$110 million), a five-fold increase over the old budget of only VND500 billion, which had been approved in March.

At a meeting in early August, Mobile World’s general director Nguyen Duc Tai said the company planned to acquire a chain of electronics stores in the North. He declined to disclose the targeted company.

According to the approved plan, the M&A budget will be mobilised from loans, bonds and new share issues and undistributed profit. In addition, the mobile devices retailer will separately issue additional 6.7 million shares, worth VND67 billion and equivalent to 2.18 per cent of its outstanding shares, to fewer than 10 investors in a private placement.

The new share issue is speculated to be designed to sell to Tran Anh Digital’s stakeholders.

Chairman Tran Xuan Kien is the biggest stakeholder in Tran Anh with a 22.7 per cent holding, while his relatives own 33.2 per cent of the company’s charter capital. Japan’s Nomaji Group holds 30.8 per cent.

Win-Win M&A

Tran Anh Digital is one of the largest electronic chains in the North with 39 supermarkets, including 14 outlets in Ha Noi. Meanwhile, Mobile World is currently the biggest electronics and mobile devices retailer with over 1,500 retail stores nationwide.

Mobile World runs three major brands including The Gioi Di Dong, Dien May Xanh and Bach Hoa Xanh.

The M&A between Tran Anh and Mobile World is reportedly a win-win deal for the two companies as it could help Mobile World expand its coverage in the northern region while Tran Anh hopes to improve its profitability through the merger.

“The value of this deal is Tran Anh’s improvement in earnings to become comparable to the growth rate of Mobile World. At the same time, Mobile World can take advantage of Tran Anh’s customer service to reach customers in the North,” a report of HCM Securities Co (HSC) said.

Shares of Tran Anh have risen 15.7 per cent this month after speculation around the deal, settling yesterday at VND34,700 ($1.53) a share on the Ha Noi Stock Exchange. According to HSC, Tran Anh’s shares may climb to VND50,000 a share.

Meanwhile, Mobile World’s shares closed at VND105,600 apiece on the HCM Stock Exchange yesterday.

After the first six months of the year, Mobile World Group recorded total revenues of VNDD31.2 trillion, a year-on-year increase of 59 per cent. Its net profit reached VND1.06 trillion, an annual gain of 28 per cent.

Tran Anh has yet to deliver its second-quarter business results. At the end of March, it posted VND1.05 trillion in net revenue, a decline of 4 per cent from the same period of 2016, and VND2.6 billion in post-tax profit, down 73 per cent year on year. – VNS