Foreign strategic investors disinterested in sharing Vinamilk pie

This opinion was expressed by Vietnam Associaation of Finance Investors (VAFI) in a document submitted to the Ministry of Finance and SCIC on October 20, to propose an alternative plan for the Vinamilk divestment.

According to VAFI, foreign strategic investors will not be interested in buying minority stakes in stated-owned enterprises because it prevents them from joining management boards. In case these investors join the sales, they will not pay very high prices to own minority stakes in Vinamilk.

Fraser & Neave Ltd. (F&N), owner of an 11 per cent stake in Vinamilk, may be the only foreign investor joining the auction because buying 9 more per cent to increase its to 20 per cent will make it the controlling shareholder of Vinamilk. F&N’s becoming a controlling shareholder in Vinamilk will decrease other foreign strategic investors’ excitement to buy the remaining stakes on sale.

VAFI added that by selling Vinamilk stakes in small pieces at a time, the state may earn $1 billion less than by pouring the whole 45 per cent on the market at once.

According to a source of newswire Dealstreetasia, Vinamilk’s stocks traded at almost VND142,000 ($6.36) on October 13 morning, representing a market capitalisation of nearly VND206 trillion ($9.24 billion). The 9 per cent stake is valued at around $831.6 million.

Thereby, according to SCIC’s plan, it will sell its 45 per cent share volume in 9 per cent increments, for $800 million each, making $4 billion on the divestment. However, in case SCIC sells the whole 45 per cent stake at once and some investor wants to buy the whole stake in one fell swoop, they may pay a lot higher than the auction price. VAFI calculated that if the sale succeeds, the winning price will be at least 25 per cent higher than the previous valued price.

Earlier on October 7, SCIC announced that it selected Singapore's Morgan Stanley Asia, Saigon Securities Inc and VinaCapital Corporate Finance Vietnam as consultants to advise on the sale of a 9 per cent stake in Vinamilk.

Accordingly, they will advise on the state divestment, from building plans to selling shares, defining selling prices to seek domestic and foreign investors.

The divestment is expected to be completed this year.

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