Foreign investors not preferred as Vietnam’s largest brewer mulls selling $1bn gov’t stake

The government still holds an 89 percent stake at the Ho Chi Minh City-based company, the maker of such popular brands as 333 or Saigon Beer, and the holding could be lowered to 36 percent, according to a proposal by the Ministry of Industry and Trade.

The ministry has formed a steering board to be in charge of the reform plan. The board is expected to seek approval for its proposition from the government, as well as for the requirements to look for strategic investors for Sabeco.

Investors are expected to join an auction to purchase the stake, which will likely be valued at VND70,000 (USS$3.26) per share, equal to the rate in the company’s public offering in 2007. The stake sale will add some $1 billion to the state budget.

Sabeco, fully known as the Saigon Beer-Alcohol-Beverage JSC, has a 40 percent beer market share in Vietnam, which consumed some 3.14 billion liters of beer last year.

Its chairman Phan Dang Tuat told Tuoi Tre (Youth) newspaper that the government could hold even a smaller stake at the company by 2018.

“Sabeco is not on the list of businesses that must be owned the government,” he said in an interview published Tuesday.

“In 2018, the 36 percent stake [of the government] could even become zero as per the country’s commitment to the World Trade Organization.”

Tuat said selling the government stake in Sabeco is intended to restructure the company, increase the state coffers, and fortify its competitiveness at a time when the Vietnamese beer market is threatened by imports.

And he wants the stake sale to be “quickly conducted,” saying it will benefit the company much more.

“Should the company continue operating under the current mechanism, its competitiveness will go down and I never want Sabeco to lose [to international] rivals on home soil,” he said.

Sabeco was privatized in 2007 but with nearly 90 percent of its stakes owned by the government, it is still a state-owned firm subject to many rigid regulations, Tuat said.

“For instance, Sabeco cannot pay $3,000-5,000 a month to recruit high-skilled employees, which foreign-invested and private companies can do easily,” he explained.

Domestic investors preferable

The Sabeco chairman said he is more concerned about who will purchase the government stake than how much the share should be priced.

The real value of Sabeco is not only its financial capability but also the market share it is holding, he said.

Tuat said foreign brewers are “extremely fond of” Sabeco, even though he cannot be sure whether they are interested in its brand or its large market share.

“I don’t know whether they want to help strengthen the Sabeco brand or to turn those who drink Saigon beer or Vietnamese beer into drinkers of [foreign] beverages,” he said, adding the latter scenario “is extremely dangerous” and should be “seriously considered.”

Tuat said if a foreign investor is to acquire the government stake at Sabeco, they will not spend money boosting its brand.

“Why should they make Sabeco more competitive than their own brand in Vietnam, which in fact has a higher profitability ratio?” he said.

“This will eventually ‘kill’ the Sabeco brand.”

Tuat warned that foreign investors may transfer their profit out of Vietnam or even commit transfer pricing, affecting the Vietnamese state budget.

“Selling the stake to foreign strategic investors may yield higher profit, and immediate benefits, but if you look further, things may not be what they seem,” he said.

Tuat thus stated straightforwardly that he wants Sabeco’s strategic investor to be a domestic one.

“I can assert that if a foreign investor steps in, they will do nothing to develop Sabeco,” he said.