With merger deal, Western Bank, PVFC, PetroVietnam have “happy ending"

Jan 7th at 12:58

07-01-2013 12:58:14+07:00

The Prime Minister has given the nod to the plan on merging Western Bank into PetroVietnam Finance Corporation (PVFC). This proves to be the can’t-be-better way out for all the involved parties.

In September 2011, the government released the Resolution No. 94 requesting state owned economic groups and general corporations to withdraw their investment capital in their non-core business fields.

The request then raised big worries to the managers of PVFC and the holding company PetroVietnam. By that time, the national oil and gas conglomerate had held 78 percent of stakes in PVFC. With such a high proportion of capital contribution, the capital withdrawal was thought to cause a chaos.

PVFC always keeps a close link with the holding company, because it was established with the major task of serving the subsidiaries of the same PetroVietnam system. No one could imagine what would happen after PetroVietnam, the biggest and the most influential shareholder in PVFC, withdraws its capital and has no deep involvement in PVFC’s operation.

Meanwhile, restructuring PVFC is a must. After developing into one of the 12 biggest credit institutions in Vietnam, PVFC has shown its big weak points.

Being a non-bank credit institution, PVFC cannot expand its network like commercial banks, cannot seek capital from the public, thus making it difficult to find medium and long term capital, and cannot provide supporting services to attract customers (card service, payment, factoring…). And the capital withdrawal by PetroVietnam was believed to worsen PVFC’s situation.

It would have been easy to deal with PVFC, if it had been a small finance company. However, in fact, PVFC is a giant with the total assets of up to 90 trillion dong. It is a listed company with tens of thousands of shareholders.

PetroVietnam itself understood that it would be a tough job to withdraw capital. It needs to sell stakes as soon as possible (prior to 2015 as requested) and in big quantities (it holds 78 percent of stakes of the company with the chartered capital of 6 trillion dong). This means that PetroVietnam should not expect the good prices of the stake sale, while it is not easy to find out the buyers who can spend big money on the stakes.

However, the PetroVietnam and PVFC have finally lifted their worries, when a way out has been found: PVFC would merge into Western Bank. This has been described as the “can’t-be-better” solution, because it allows settling several problems at the same time.

PetroVietnam has suddenly seen its ownership ratio in PVFC decrease from 78 percent to 52 percent, while it does not have to struggle hard to sell stakes. PVFC, after getting merged into Western Bank, would create a new bank with the chartered capital of 9 trillion dong.

Sources have said that since the merger deal goes smoothly, a lot of investors have shown their interest in the opportunities to invest in the new bank by hunting for the shares to be sold by PetroVietnam.

The sources said that it is highly possible that some institutional investors would negotiate on the purchase of 288 million stakes from PetroVietnam. If so, PetroVietnam’s ownership ratio in the new bank would decrease to 20 percent.

If the scenario happens as predicted, PetroVietnam would be able to reduce its ownership ratio in PVFC as requested by the Government. Meanwhile, its ownership ratio in the new bank would still be high enough to have business links with the bank for mutual benefits.