SCIC to give up cash cow Vinamilk

  • September 14, 2015

The Ministry of Planning and Investment (MPI) has confirmed that the State Capital Investment Corporation (SCIC) will withdraw capital from Vinamilk, though the dairy producer is a big source of income for SCIC.

Vietnam, SCIC, Vinamilk, MOF

An MPI representative said at the M&A (merger & acquisition) Forum held in HCM City some days ago that SCIC would no longer hold a stake in Vinamilk.

Nguyen Tri Hieu, a renowned banking expert, lauding the decision, said there was no reason for the state to continue holding Vinamilk shares and that capital withdrawal was inevitable.

Vinamilk does not operate in fields related to national defence or security, and dairy production is not considered a ‘sensitive’ business field which the state has to control.

Huynh The Du from the Fulbright Economics Teaching Program said if the state withdraws capital from Vinamilk, it will have a big amount of money it can spend on dealing with bank bad debt and other issues.

In fact, analysts say, SCIC should have left Vinamilk a long time ago, but it still hesitated to do this because Vinamilk is a ‘goose that lays golden eggs’ for SCIC.

As such, SCIC will sell Vinamilk’s shares to withdraw capital. 

With the current market price, the 45 percent of Vinamilk shares that SCIC is holding will have total value of VND57 trillion, or $2.6 billion, a huge amount compared with the Vietnamese stock market.

Therefore, Hieu thinks now is not the best time for SCIC to sell Vinamilk’s stake. However, withdrawing capital from Vinamilk is a must.

In order to optimize its capital withdrawal plan, SCIC should open Vinamilk’s doors to foreign investors. 

Hieu noted that foreign investors should be allowed to buy up to 51 percent of shares.

If foreign investors can hold a large proportion of shares, they will serve not only as financial investors, but will also bring modern technologies and corporate governance skills to Vinamilk.

An analyst warned that Vietnam needs to remain cautious when selling stake to foreign investors. 

Once Vietnamese powerful conglomerates fall into foreigners’ hands, the national economy may be put at risk.

Therefore, the sale of Vinamilk shares will be a question that needs thorough consideration.

Hieu said there should be policies which give priority to capable Vietnamese investors to buy Vinamilk shares. 

However, he admitted that it was difficult to implement the plan. 

If SCIC relies on domestic investors, it will not be able to fulfill the plan on selling Vinamilk shares within a short time. Domestic investors are not capable of ‘swallowing’ $3 billion worth of Vinamilk shares.

Dat Viet



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