Vietnam is seeking to divest government stakes in at least 10 local companies, including a full divestment from the country’s largest dairy farm Vinamilk, as the state seeks to pull back from non-strategic businesses and raise funds to offset budget deficit.
The state publication VnEconomy released a document coded 1787/TTg-DMDN, which regulates that the State Capital Investment Corporation (SCIC) will have to offload the entire 45.1 per cent holding in Vinamilk. The stake is valued at $2.4 billion, while the total divestment from the 10 companies will potentially generate $3 billion in cash for the SCIC.
This huge source of money is enough to offset the budget deficit this year, and at the same to help the government pay some public debts worth $2 billion coming due, a local report said.
Meanwhile, the SCIC will have to renounce the dividends it enjoyed from Vinamilk and other enterprises. Holding 541 million Vinamilk shares, the SCIC enjoyed dividends for the 2014 fiscal worth more than VND2 trillion ($89.3 million).
The SCIC is currently the largest shareholder of Vinamilk, followed by Fraser and Neave’s F&N Dairy Investment with a 9.54 per cent ownership. Foreign minor shareholders are asset management firms under Templeton and JP Morgan Singapore.
Being the second biggest listed stock in the local securities market after Vietcombank, Vinamilk has reached a market capitalisation of over VND126 trillion ($5.6 billion).
10 companies the SCIC will have to make divestment. Meanwhile, the SCIC will also be selling bulk of the shares of tech giant FPT Corporation, in which it is holding six per cent, and insurance firm Bao Minh Corporation (holding 50.7 per cent). It is unclear whether the divestments from the other nine firms are partial or full sale.
As Vietnam has slashed the cap on foreign ownership limit in listed companies, it is much anticipated that overseas investors will make more investments into local companies once the SCIC implements divesting the stakes. However, the extended foreign ownership depends on the companies’ will and openness.
Local experts have said that the SCIC should let go of its interest in profitable businesses like Vinamilk and FPT Corp to focus resources on restructuring debt-laden, loss-making state-owned companies and making them more worthwhile “apple of the eye” to investors, particularly amid the country’s ambitious move to equitise some 500 state-owned enterprises within only two years.