Investors can see M&A opportunities from SOE equitization

Investors can see M&A opportunities from SOE equitization

The restart of the State owned enterprises (SOEs) equitization process has been seen by experts as the golden opportunity for the merger and acquisition (M&A) market.

The government has decided to refresh the SOE equitization process which once reached a deadlock due to the sharp falls of the stock prices. The Ministry of Finance (MOF) has recently announced the plan to restructure 889 SOEs in 2011-2015, of which 367 enterprises would be equitized, while the other 532 enterprises would be either put for assignment, sale, contracting, leasing or dissolution.

Also according to MOF, 93 SOEs have registered to carry out the equitization right in 2012, including the 22 SOEs belonging to ministries, 33 SOEs under economic groups and general corporations, and 33 local enterprises.

The list of the SOEs includes the big names that foreign investors have been eyeing, such as Vinatex, a textile and garment group, Binh Son petrochemical refinery, Viglacera, a building material manufacturer, or Lilama – the machine installation and construction corporation.

Prior to that, the Vietnam Shipbuilding Industry Group Vinashin offered to transfer its stakes in 32 companies in different fields, from investment funds, gas, tourism, porcelain to oil rig manufacturing.

Thirteen subsidiaries and the land assets at four other subsidiaries of the shipbuilding groups have also been put on sale.

The land properties include 318,000 square meters in waters area for aquaculture in Quang Binh and Thua Thien-Hue provinces; the land plot for education establishments and the new urban areas in Da Nang City and Quang Nam province.

This is a part of the program on restructuring enterprises of the big economic groups with 200 subsidiaries. Under the program, Vinashin would retain 15 subsidiaries, two joint ventures, one associated company by 2013

The restructuring process at Vinashin, plus the equitization of a series of SOEs, are the goals of many investors.

According to Pham Tuan Anh, Deputy Director of the SOE Renovation Department, there were nearly 6000 SOEs in 2001, while the figure has dropped to 1309, while 60 percent of which would have to go equitized in the time to come.

“The equitization process would be sped up, which would serve as a great opportunity for investors to make merger and acquisition deals,” Tuan said.

Andy Ho. Managing Director of VinaCapital, the investment fund which has invested in four SOEs, including Vinamilk (dairy producer), Phu My Fertilizer, Lam Thao Fertilizer and Phuoc Hoa rubber, has said that the equitization process in Vietnam, an indispensable activity in a developing market of Vietnam, has entered the final stage.

He believes that the liquidity in the stock market would increase, thus pushing up merger and acquisition affairs. He can see a high possibility of SOEs making IPO (initial public offering) in the next three years.

The list of attractive enterprises, according to Andy Ho, includes Vinatex, Vietnam Airlines, Vinafood 1 and Satra. Especially, the equitization of MobiFone, a big telecom corporation with the turnover of 2.1 billion dollars and pretax profit of 286 million dollars, has become very attractive in the eyes of investors.

The government of Vietnam has been urged to speed up the equitization of SOEs as an effort to restructure the state owned economic sector which is enjoying most of the national resources, but still cannot bring the desired effects.

vietnamnet