The State Capital Investment Corporation (SCIC) has failed to fully sell 9 per cent of the Vietnam Dairy Products JSC (Vinamilk) stakes in one go as only two bids for 2.7 per cent stake each, worth a combined $500 million, went through on December 12.

2 firms owned by Thai billionaire pick up Vinamilk stakes

Two wholly owned units of Singapore-headquartered Fraser and Neave Ltd (F&N), owned by Thai billionaire Mr. Charoen Sirivadhanabhakdi have successfully bought another 5.4 per cent at Vinamilk.

One of the units, the F&N Dairy Investment, is already Vinamilk's second-biggest shareholder with a 11.04 per cent stake. After this sales, there will be no change in the decision making at Vinamilk.

“We are the investor only, and the current management team will still manage Vinamilk's operation”, said Mr. Hui Choon Kit, Chief Financial Officer of F&N on the sidelines of the auction on December 12. However, “we are happy to support Vinamilk, both domestically and in the overseas market”.

The SCIC, which represents the government's 44.7 per cent ownership in Vinamilk, took the market by surprise last month when it announced each investor could only buy up to 2.7 per cent of Vinamilk's shares.

With a starting price of VND144,000 ($6.35) per share, the Thai billionaire paid an extra VND800 billion ($35.3 million) for Vinamilk’s shares compared to its market price, which closed at VND132,500 ($5.85) after the trading session on December 12.

The stock has been hit by a sell off in Vietnamese shares as investors shun emerging markets amid uncertainties after the U.S. presidential election and a potential rates hike by the Federal Reserve.

With the government failing to successfully execute the 9 per cent Vinamilk’s stake sale, the result has caught everyone off guard, as many believed foreign investors would not miss this chance to grab a piece of the billion dollar cow.

Vinamilk, Vietnam's top listed firm by market value, is seen as one of the country's most attractive company as it commands around half of the domestic market for dairy goods and has seen steady earnings growth.

On a positive note, Mr. Nguyen Duc Chi, SCIC’s Chairman believes the two bids, accounting for 60 per cent of the stake sale, is already a success.

“This is the lesson for auctioning authorities to take note of”, Mr. Chi spoke at the auction on December 12. “For the remaining  3.6 per cent, the SCIC will propose to the government two options; add into the rest of the 35 per cent that SCIC is holding at Vinamilk, or auction again in the near future.”

The muddled sales process has underscored Vietnam's relative inexperience and investor wariness about state control as the government seeks to push forward with a major privatization drive - one that has already been hampered due to the small stakes on offer and concerns about vested interests.

Mr. Dominic Scriven, Executive Chairman of Dragon Capital said that foreign investors are not upset because of the piecemeal sales method. “The effort by the government to push the overall equitization process forward has been good news”, Mr. Scriven told VET. However, “the government should learn the lesson through those minority stake sales”.

VN Economic Times