Encouraging long-term foreign interest in SOEs

July 01, 2019 | 16:24
Vietnam’s state-owned enterprises will continue to sell shares to foreign investors over the next year, with regulations being improved to facilitate cross-border deals. Before attending the financial investment promotion forum in London, Nguyen Duc Chi, chairman of State Capital Investment Corporation (SCIC), shared with VIR’s Phong Lan some of the upcoming sales.
encouraging long term foreign interest in soes
Nguyen Duc Chi

What opportunities do you bring to Europe this time, through the forum in the UK?

Based on plans approved by the prime minister, SCIC is scheduled to equitise five state-owned enterprises (SOEs) and divest from 132 others by 2020. In past years, SCIC has carried out a number of high-profile transactions that attracted both foreign and domestic investors. For example, the two stake sales of Vinamilk in 2016 have raised $800 million for the state budget, in exchange for 8.73 per cent of Vinamilk’ stake. We also sold 29.49 per cent of Binh Minh Plastics’ stake for $100 million, or 57 per cent of Vinaconex for close to $300 million. In the near future, we will continue our divestment plans at FPT, Bao Minh Insurance, Sa Giang Export & Import JSC, Tien Phong Plastics, Domesco, and so on. There are many lucrative and fast-growing businesses on the list.

We also hope to collaborate with foreign investors in several key projects in Vietnam’s development strategy, such as infrastructure, healthcare, telecommunications and IT, energy, mining, and etc.

Possible forms of collaboration include setting up a new business, buying shares in an existing business, signing contractor deals or co-operation contracts, and joining in different stages of the development process, from brainstorming to implementation.

What do foreign investors often look for when selecting Vietnamese companies to partner up with?

From my experience, foreign investors often wish to buy a large amount of shares to gain control at Vietnamese companies, and they also hope to become long-term partners. Most investors call for reductions in the foreign ownership limit, and they also want new auction methods such as book building or private placements for strategic partners.

Major corporations from abroad usually target industry leaders in Vietnam, who have dominant market share in their sector and high levels of profitability. This is why they keep a close watch on Vietnam’s list of equitisation and share sales of major SOEs.

When it comes to large transactions, SCIC will carefully consider what business to put on sale first, what time to hold the sale, and how many shares should be made available to investors. The process often starts with hiring consultants, underwriters, and advisors and then continues with hosting a number of roadshows in Vietnam and abroad. We then begin the business valuation process to determine the right price and last but definitely not least, we carry out the transaction itself.

We are happy to have gained some good experiences from previous successful sales. In general, we realised that information transparency is very important, and we must be well-prepared to answer in detail any question that investors might have. Moreover, we also take into account any suggestions or recommendations that investors put forward so that we can improve on future transactions, ensuring the success of every sale.

Investors have voiced their opinions on how Vietnam can do better in facilitating cross-border transactions. What changes have been made so far in this matter?

Based on the feedback we received from overseas investors, SCIC has worked hard to make it easier for cross-border deals. We’ve asked relevant government bodies to improve transaction rules, and so far, we’ve made some great progress. Investors now don’t have to make a public bid, and they are also allowed to submit the trading number within 15 days after the transaction date.

Another important development is that foreign investors can pay their deposits in USD as opposed to VND as before, and the transaction can be carried out at all approved banks. Prior to 2016, investors had to prepare 110 per cent of the transaction value before the trading took place, of which 10 per cent were refundable deposits. Nowadays, they only have to prepare 100 per cent of the value, and the refundable deposits are already accounted for in this one-time payment. In the very near future, we’ll also launch the book building method, which is closer to international practices and ensures fairer pricing for investors. The regulatory framework for this method is already published.

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