Vinamilk Proposes Removing Foreign Ownership Cap

Tuan Minh

10:07 04/11/2015

BizLIVE - Vinamilk has suggested the government lift the foreign ownership limit in the firm to 100% as many overseas investors long for larger holdings.

Vinamilk Proposes Removing Foreign Ownership Cap

A production line of Vinamilk. (Photo: Internet)

Vietnam Dairy Products JSC (Vinamilk), the country’s largest milk producer, has put forward a proposal to scrap the foreign ownership limit (FOL), which is set at 49% currently, in it, arguing that milk is not a “sensitive” industry that needs state control.
This is the first time Vinamilk has officially submitted such a proposal to the government and parliamentary committees.
The scrapping of the FOL will not necessarily mean the disappearance of the Vinamilk brand and foreign participation will help the brand reach out to the regional and global markets. In addition, lifting the FOL will create an easier access to foreign funding when needed, Vinamilk said.  
“We want to open the room by the limit allowed by the government because the investment of overseas investors will not just bring capital but also advanced corporate management experiences,” said Bui Thi Huong, a Vinamilk executive director, told Bloomberg late last month.  
“Vinamilk’s always at the top of foreign investors’ interests, and the 49% cap has been a hurdle for overseas investors to access the company for a long time,” says Hanoi-based Dang Tran Hai Dang, deputy head of research at VietinBank Securities JSC.
The Saigon Times on Monday cited an unidentified chief executive of a foreign fund represented on Vinamilk’s board as saying that Singapore’s Fraser & Neave (F&N) had offered to buy out the State Capital Investment Corporation (SCIC)’s 45% stake in Vinamilk for $4 billion. The offer put Vinamilk stock at 167,000 dong ($7.42) a share, 43% higher than its closing price on November 2.
Vinamilk shares ended up 5.1% to 123,000 dong each on Tuesday although F&N earlier denied press reports saying that it had not submitted any offer letter to Vietnam Dairy Products or SCIC with regard to any possible offer to purchase SCIC’s stake in Vinamilk.
Fraser & Neave now holds an 11.04% stake valued at $724 million in Vinamilk, making it the second-largest shareholder in the Vietnamese firm, after SCIC. Dragon Capital, VinaCapital, Deutsche Bank AG and Franklin Templeton Investments also hold shares of Vinamilk.
The government last month instructed its SCIC to divest entirely from Vinamilk and nine other firms. However, SCIC has yet to announce a roadmap for its withdrawals.
Vinamilk, therefore, recommended the government soon unveil a schedule for the divestment so that investors can prepare funds. “Now is a good timing for the state to divest from Vinamilk” thanks to good macroeconomic fundamentals and increased interest of foreign investors following the conclusion of Trans-Pacific Partnership negotiations, the firm noted.
The dairy firm also suggested SCIC unload its 45% stake through large-batch sales and via public auctioning.
A host of international institutions have expressed interest to enlarge their stakes in Vinamilk. Franklin Templeton Investments, chaired by investment guru Mark Mobius, wants to buy in Vinamilk shares.
“Liquidity is quite low, which is why this move from the government is a giant step forward,” Mark Mobius told Bloomberg. “We have quite a big holding in Vinamilk and we’d probably buy more at the right price.”