Foreign investors want to buy controlling interest in equitized SOEs

Many foreign investors that want to become strategic partners of large state-owned conglomerates are finding it difficult to negotiate prices.



According to the National Assembly Economics Committee, the equitization plans of 33 SOEs were approved in the first eight months of the year with real value of VND80.6 trillion, or three times higher than their charter capital.

Each of the enterprises has value of VND2.4 trillion on average, much higher than the value of the enterprises previously equitized. The list of 33 SOEs include big names such as the Vietnam Rubber Corporation and Vinafood 2.

Though the goods for sale are plentiful, the limited ratios of shares make the sale unattractive to foreign investors.

Tony Foster, managing director of Freshfields, a law firm, commented that foreign investors have encountered obstacles in the path to become strategic partners of equitized SOEs when negotiating share prices and the proportions of stakes to buy.

Vietcombank did not succeed in the first and second stake sale campaigns because of failure in price negotiation. Only in late 2011 did the bank successfully sell a 15 percent stake to Japanese Mizuho.

The same situation happened to MobiFone, one of the three largest mobile networks in Vietnam. The telco planned to sell a stake 12 years ago, but has never done so.

In the case of PVOil, it drew up a plan to sell a 20 percent stake to strategic shareholders in 2012, but this has not been implemented.

According to Foster, the reasons behind the ineffective stake sale plans are the small proportion of stake offered, the lack of transparency in the sale process, unclear rights and assets, and nonnegotiable prices as the enterprise valuation does not follow international standards.

He said it is necessary to clarify which kinds of assets are taken into account when assessing the value of enterprises.

The lawyer said that a small stake proportion will only have significance in financial investment, and won’t be effective for strategic investment. The shares will go for better prices if the state permits the sale of a controlling stake proportion while amending the current regulations and making the implementation transparent.

He suggested that the state amend the current laws to allow foreign investors to hold more than a 49 percent stake in equitized SOEs.

Sharing the same view, the director of the Vietnam Economics Institute Tran Dinh Thien pointed out that though 96.5 percent of SOEs have been equitized, only 8 percent of the state’s capital has been transferred to the private sector. This is attributed to the limited stake proportions offered for sale.

Thanh Mai / vietnamnet