Equitisation-driven SOEs struggling to find partners

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Though its initial public offering date is fast approaching (March 27), the Vietnam Motor Industry Corporation (Vinamotor) has yet to decide on a strategic partner.

“Finding strategic partners is one of our greatest concerns, particularly as the IPO date is so near,” said chairman Nguyen Hai Trung.

Vinamotor plans to sell 51 million shares at a starting price of VND10,000 at its upcoming IPO.

Local investors have no cap on the number of shares they can buy, foreigners however are limited to 49 million shares only.

Another case is the oft-delayed IPO of Vietnam National Textile Garment Group (Vinatex).

Most recently the company’s deputy general director Le Tien Truong said the IPO would take place in the second quarter of 2014 and that their equitisation plan was already in the hands of the government awaiting approval.

Vinatex’s IPO was initially set for 2008, but was delayed several times due to a combination of factors including unfavourable market conditions.

Vinatex plans to sell a 49 per cent stake to investors while the remaining 51 per cent will be retained by the state.

Of this 49 per cent, strategic partners can buy up to half.

Vinatex is attractive to foreign investors thanks to its stable growth in most areas, but finding a strategic partner has proved a difficult task.

Company executives have held talks with a number of potential investors over the past several months, but no decision has yet been made.

According to Vinatex chairman Vu Duc Giang, the group’s criteria for selecting strategic partners is primarily set at businesses in the same field with modern management expertise, market knowledge, flexible and compatible financial solutions and interested in the textile and garment business while not being restricted by government investment law.

The IPO of Viglacera – the leading manufacturer of building materials in Vietnam – took place at the Hanoi stock exchange in February. Only 19.5 million shares were sold, 25.3 per cent of the total volume on offer.

One foreign investor bought over 10 million shares, 52 per cent of the total transacted volume.

Viglacera is aiming to reduce state ownership from 75 per cent at current to below 51 per cent and is scaling up its efforts to source investors.

The firm is reportedly discussing a cooperation deal with a financial institution from Japan. Negotiations are expected to conclude within this year.

According to Viglacera chairman Luyen Cong Minh, the firm will sell 10-20 per cent to up to three foreign partners.

“These partners will assist us in improving our product quality and boosting export performance, as well as local consumption,” said Minh.

Vina Capital managing director Andy Ho said valuation was often a challenging task in equitisation.

“Therefore state-owned businesses should consult with potential investors about setting an appropriate starting price for shares. They should also seek expert advice on business structure and corporate governance matters in the post-equitisation period,” said Ho.