Vinalines’ IPO hits a tougher road after SK failure

Vinalines’ IPO hits a tougher road after SK failure

As it was believed to be relatively easy for SK Securities to meet the criteria for the acquisition, the failure, which was announced by the Ministry of Transport last week, has led to disappointment as it was considered one of the hottest merger and acquisition deals in the Vietnamese shipping industry for 2018.

SK Securities was the only investor that registered to buy-in a 14.8 per cent state stake in Vinalines amidst strong attention from international corporations, including Belgium’s Rent-A-Port as well as others from Japan, the US, and South Korea.

SK Securities was previously a brokerage unit of South Korea’s third largest conglomerate, SK Group, and is now a new arm of J&W Partners Ltd. after an acquisition deal carried out last month.

The question of why the stake sale was not attractive enough to investors arises, and whether SK Securities might find other opportunities in the IPO remains.

According to Vaibhav Saxena, lawyer of Vietnam International Law Firm, although Vinalines is a leader in the Vietnamese shipping industry, its annual revenues and profits remain at a low level. In the first half of 2018, the group’s profit stood considerably low at only VND73 billion ($3.23 million), compared to the whole-year target of VND668 billion ($29.56 million).

Accordingly, investors who want to earn a profit immediately after their investment shall not be interest in Vinalines’ initial public offering (IPO), according to the lawyer.

“The requirements to buy Vinalines’ stakes are strict. The investors must meet common standards. For example, they have profitability in recent two years, sustain no losses, and pledge to maintain Vinalines’ core business for at least three years,” Saxena told VIR. “Also, there are analysts forecasting that investors do not like to join Vinalines’ equitisation process as they want to hold the controlling stake of over 51 per cent in the group.”

With the collapse of SK Securities deal, Vinalines is now betting it all on its IPO, which is scheduled for early September. In addition to auctioning off 20 per cent of its stake, the group will also offer the additional 14.8 per cent left over from the first stake sale to strategic partners. As planned, the IPO will be conducted on the Hanoi Stock Exchange at a starting price of VND10,000 ($0.44) per share.

Vinalines is planning to conduct a roadshow on August 20 to promote this sale, pinning high hopes of fruition onto this.