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Vietnam planning $900 million Vinamilk stake sale, taps banks

September 21, 2016
Consumer Packaged Goods

Vietnam has invited about half a dozen foreign investment banks to advise it on selling its stake in dairy company Vinamilk, sources said, in one of the strongest signs yet of the government getting serious about offloading its most lucrative assets.

Credit Suisse, HSBC, J.P. Morgan Chase, Nomura Holdings, and advisory firm Rothschild are among the firms that recently received requests from Vietnam’s government, several sources with direct knowledge of the matter told Reuters.

The communist government’s investment arm, the State Capital Investment Corporation (SCIC), holds a 44.7 percent stake in Vietnam Diary Products JSC, as Vinamilk is formally known. It intends to sell roughly 10 percent, worth about $900 million at the current market price and then offload the rest incrementally, said the sources who were not authorized to speak to the media.

Vietnam’s steps to deliver on its promise to sell the fast-growing dairy producer will be welcomed by investors frustrated with a stuttering partial-privatization drive, missed targets, red tape, contradictory signals and allegations of vested interests.

Though many state-owned enterprises (SOEs) have sold stakes, Vietnam has been criticized for dragging out what it calls “equitisation” of its more attractive firms, or offering stakes that are too small.

The first chunk of Vinamilk could be sold at a premium as several Asian companies and private equity firms are jostling for shares, said the people.

Vinamilk said it had no comment as the sale depended on SCIC, which declined to comment. JPMorgan, Credit Suisse and HSBC declined comment while Nomura and Rothschild had no immediate comment.


Vinamilk is the country’s biggest listed firm with a market value of nearly $9 billion. It has grown 21 times in value since it listed a decade ago and its shares have gained 28 percent this year in anticipation of more shares being available once SCIC starts to divest. The company scrapped its 49 percent foreign ownership cap in July.

Vietnam has also reached out locally to Saigon Securities Inc and Viet Capital Securities, one source said.

Vietnam’s government has acknowledged its SOE selloff has been problematic but officials argue the process is mired in crossover regulations that take time to unravel.

Some businessmen say executives are also cautious about rushing the process and fear falling foul of strict laws carrying jail sentences for causing economic losses to the state.

Analysts have also said public debt – currently approaching 65 percent of GDP – is a factor hastening the selloff as Vietnam seeks capital to fund much-needed infrastructure projects and spiraling social welfare costs.

“There are signs that they want to get it done. It is probably the easiest to get done among Vietnam deals,” one person familiar with the matter said.

F&N Dairy Investments, backed by Thai beer billionaire Charoen Sirivadhanabhakdi, already owns 10.9 percent of Vinamilk, and the tycoon is keen to bolster his stake in the company, the people said. A spokeswoman at F&N said she had no immediate comment.

The block being offered does not come with a board seat though that could be separately negotiated with by the government and the seller shareholders, the people said. F&N currently has one seat on Vinamilk’s board.

Apart from the Vinamilk sale, the government is planning to sell its stakes in two state-owned breweries valued by the government at $2.2 billion. One, Sabeco, is also on the radar of Thai beer magnate Charoen.

A Vinamilk stake sale is expected this year after Prime Minister Nguyen Xuan Phuc ordered SCIC to speed up the process, according to the deputy head of the finance ministry’s financial department for enterprises.

“There may be several Vinamilk stake sales rather than a one-time sell off,” Dang Quyet Tien told reporters last week.

“The sale must be carefully calculated to ensure the state’s benefit, transparency and keeping the stock market stable, which is the biggest concern now as our market is small.”

The Southeast Asia country of 90 million people is one of the fastest growing economies in the region and the benchmark Vietnam index .VNI has risen 13 percent this year.

By Denny Thomas, Anshuman Daga and Mai Nguyen

Source: Reuters

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