Vinamilk share sale sees F&N lift stake but fails to attract other buyers

HANOI (REUTERS) - Singapore-listed Fraser and Neave boosted its stake in Vietnam's Vinamilk but the sale of shares in one of the state's most attractive assets failed to draw in other buyers after highly restrictive investment caps were imposed.

The State Capital Investment Corporation (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.

Those sudden restrictions as well as unfavourable market conditions saw only two bids lodged for the 9 per cent of Vinamilk on offer - both from wholly owned units of Fraser and Neave (F&N).

The food and beverage firm, already Vinamilk's second biggest shareholder and backed by Thai tycoon Charoen Sirivadhanabhakdi, bought an additional 5.4 per cent of Vinamilk for US$500 million (S$714.8 million) to take its holding to just over 16 per cent.

But other investors stayed away - also put off by a drop in Vinamilk's share price below the 144,000 dong minimum set by the government. The stock has been hit by a sell off in Vietnamese shares as investors shun emerging markets amid uncertainties after the US presidential election and a potential rate hike by the Federal Reserve.

"The minimum bidding price of 144,000 dong is actually not expensive for a strategic investor in Vinamilk, but the issues are the timing and the restrictions that come with it," said Nguyen Thanh Lam, deputy manager at Maybank Kim Eng Securities in Vietnam.

The SCIC, however, said it was pleased with the sale. F&N paid a US$36 million premium to Monday's closing price. "Given the vulnerable stock markets in Southeast Asia and Vietnam, Vinamilk's share disposal transaction by the SCIC can be seen as a success," it said in a statement.

Vinamilk, Vietnam's top listed firm by market value, is seen as one of the country's most attractive companies as it commands around half of the domestic market for dairy goods and has seen steady earnings growth. Its shares have jumped 20 times in value since its debut on the Ho Chi Minh bourse 10 years ago.

"We are delighted to have this opportunity to increase our stake in Vinamilk," a spokesman for F&N said in an email. "The group's additional investment reflects our confidence in Vinamilk's management, growth and long-term prospects, as well as commitment to growing our presence in Vietnam," she added.

Other closely watched offerings coming up include the sale of government shares in Vietnam's top brewers Sabeco and Habeco. The government owns nearly 90 per cent of Sabeco and is keen to unload its entire stake by 2017.

That sale process is slated to kick off in April, the Wall Street Journal reported on Monday, citing people familiar with the matter, adding that at least 40 percent of the company - worth nearly US$2 billion at current market prices - would be on offer.

Privately owned budget carrier Vietjet is also due to sell shares later this year.

Fiachra Mac Cana, managing director and head of research at Ho Chi Minh Securities, said the Vinamilk share sale did not necessarily bode ill for other asset sales. "I feel that the sale is actually a good initial step with a few lessons learned as to how to do better next time," he said. "In any event, the government hasn't been doing this for that long so in a way we should expect them to be learning as they go."

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