Strategic investor safety net

According to decision No. 495, signed by Deputy Prime Minister Nguyen Sinh Hung, any reshuffling SOE that has not made an initial public offering (IPO) prior to April 20 would not be able to sell stakes to strategic investors at preferential prices.
The decision will remove the existing mechanism in which strategic investors are allowed to purchase stakes at a price 20 per cent on average lower than that defined through an IPO.
Analysts said that the government could obtain more capital from selling stakes of reshuffling SOEs to strategic investors. Meanwhile, a number of reshuffling SOEs would find more difficulties in finding and selling stakes to strategic investors which do not want to buy stakes at price equivalent to that on the market.
Trinh Thanh Hoan, head of the Ministry of Finance’s Insurance Department gave Bao Viet Insurance Group as an example. The group, which has chartered capital of VND800 billion ($422 million), is poised for an IPO by the year’s end but is finding it difficult to attract strategic investors following the recent decision.
Hoan said: “Some foreign investors are no longer keenly interested in becoming strategic partners now as they have been halted from access to a preferential price of purchasing stakes after the decision.”
He said that from now on, strategic partners would just pay attention to buying into reshuffling SOEs that offer them high dividends or help carve a firm standing in Vietnam’s market.
However, Le Hong Sanh, sales and marketing manager of the Saigon Beer-Alcohol-Beverage Corporation (Sabeco), said that SOEs offering potential profits after an IPO would still be attractive to foreign strategic investors.
He said Sabeco had already received several offers from foreign investors hoping to become strategic investors once the firm goes ahead with its IPO in the third quarter, however, the corporation is sticking to its guns and not permitting foreign strategic investors.
Sanh said that a lack of preferential pricing was not keeping foreign investors from knocking on Sabeco’s door, because the brewer is a strong corporation set to become a dominant player in the beverage industry.
A manager from a foreign invested auditing and accounting firm operating in Hanoi said that the decision would have the advantage of allowing the government to obtain several million dollars that would have been lost to preferential pricing policy.