Hanoi eyes wider privatisation plan but offshore groups resist non-control positions.
A Jardine Matheson company has paid $616.6m for a 5.53 per cent stake in Vinamilk, Vietnam’s largest listed company and dairy group.
Singapore-listed Jardine Cycle & Carriage said in a regulatory filing on Monday that one of its wholly owned subsidiaries bought the stake in an auction from the State Capital Investment Commission of Vietnam, the largest shareholder in Vinamilk.
The sale to a foreign group comes as Vietnam attempts to unload more stakes in state-controlled companies to private and foreign investors.
The efforts at quasi-privatisation, known as “equitisation” among Vietnamese reformers, has been slow. Many of the country’s largest companies have brought to market only small equity stakes in their businesses, a strategy that critics say will not shake up state-guided leadership.
Despite the attention from global investors on sale of companies such the Habeco and Sabeco beer groups, many of the state divestments have taken years.
The government originally intended to put on the block as much as 9 per cent of Vinamilk, making the auction one of Vietnam’s most highly anticipated privatisations.
However, the state was forced to scale back the sale last year due in part to lack of demand. The government eventually sold off a 5.4 per cent stake in the business last year to TCC, a Thai conglomerate.
The process for Vinamilk has given some industry watchers a mixed view on the future of privatisation.
The size of the Jardine investment was a sign that international investors have become more comfortable with taking on assets that are still ultimately controlled by the state, said Jeff Olson, a partner at Hogan Lovells in Ho Chi Minh, Vietnam’s commercial centre.
“On the other hand, the fact that a majority of the stake purchased by Jardine was left over from the 9 per cent of Vinamilk originally offered for sale in December of last year shows that many potential buyers remain hesitant to invest when the size of the stake on offer is not large enough to provide a meaningful degree of control over the management of the target company,” Mr Olson said.
To date, Warburg Pincus’s $200m investment in Vincom Retail has been touted as the best example of successful foreign investment in Vietnam. The private equity group exited that investment this year through an initial public offering.
Jardine has already made several investments into Vietnam. The Hong Kong-based company operates the KFC and Pizza Hut franchises in the country.
In a third quarter statement, Jardine said that earnings improved during the period. One of the company’s retail arms, Dairy Farm, experienced flat sales in southeast Asia during the three months due to what it called “difficult trading”.
In Asia, Chinese companies have been the biggest investors in dairy. The country’s domestic supply of milk is not enough to meet rapidly growing demand, and companies have looked overseas, particularly to Australia and New Zealand, as a source of dairy goods.
By: Don Weinland
Source: The Financial Times