Vietnam Airlines Corp., the national carrier, plans to sell as much as a 15 percent stake to foreign investors as the government seeks to accelerate the overhaul of state-owned companies and spur economic growth.
The government plans to sell from 10 percent to 15 percent of the airline, most likely after an initial public offering in September, Deputy Transport Minister Nguyen Hong Truong said in an interview in Hanoi yesterday. The carrier is valued at 57 trillion dong ($2.7 billion) by Morgan Stanley (MS:US) and Citigroup Inc. (C:US), Truong said.
The national carrier is among more than 400 state-run companies that Vietnam will equitize by the end of next year to boost the country’s productivity and restructure the economy. Prime Minister Nguyen Tan Dung is considering raising foreign ownership caps at listed companies.
“Vietnam lacks money,” said Truong. “Vietnam lacks advanced technologies and markets, so bringing in foreign strategic investors will help our state companies to grow.”
The airline is in talks with potential investors that include international carriers and financial companies from Singapore, Thailand and Europe, he said, without elaborating.
The government has given its approval for Vietnam Airlines to sell a 25 percent stake, which includes both sales to strategic investors and shares at the IPO, Truong said. Dung still needs to sign-off on a detailed plan for the sales, with a final shortlist of foreign investors expected in June, he said.
Truong said he’s confident the airline will be able to sell the full stake.
A successful offering of the national carrier would kick-start the goverment’s push for share sales of other state companies, said Marc Djandji, a partner at Ho Chi Minh City-based Asean Strategy Group.
“Vietnam Airlines would be a flagship equitization,” Djandji said in a telephone interview. “It would put the process of equitization back on the map for Vietnam. If it finds a strategic investor and the sale happens, it will give some confidence back to investors.”
Foreign investors participated in only one of Vietnam’s two dozen IPOs of state companies through April 23, according to exchange data. The government raised 1.36 trillion dong from the IPOs, about 35 percent of the 3.9 trillion-dong it targeted for the offerings, according to data from the nation’s stock exchanges in Ho Chi Minh City and Hanoi.
The benchmark VN Index (VNINDEX) was little changed today at 541.49, paring its gains this year to 7.3 percent. The gauge rose 22 percent last year, the biggest advance among major Southeast Asian indexes.
The transport ministry also plans to sell stakes in eight sea ports now held by Vietnam National Shipping Lines this year and the parent company will hold an IPO early 2015, Truong said.
The government has approved Samsung Heavy Industries Co. (010140)’s purchase of as much as a 50 percent of a shipbuilding company held by Shipbuilding Industry Corp., formerly known as Vinashin, in Cam Ranh Bay, according to Truong. The South Korean giant is also interested in buying a stake in Ha Long Shipbuilding, he said.
“It’s crucial for us to have the planned share sales done successfully to send a clear message to international investors that we really want them to come,” Truong said. “We have improved the stake sale process with better evaluation methods and are determined to sell stakes in these companies.”
Vietnam is accelerating sales of state shares as part of efforts to bolster an economy that the World Bank estimates will expand 5.4 percent this year, a seventh straight year of growth below 7 percent.
Prime Minister Nguyen Tan Dung in March instructed ministries to speed up public share sales in state enterprises and spur these companies to focus on core businesses as the country’s economic growth slowed and its financial system came under pressure from Southeast Asia’s highest level of bad debt.
The government has been trying to boost competitiveness in the state sector, which the International Monetary Fund last year said is a key source of economic vulnerability. The state companies use up about 50 percent of public investment, tie up 60 percent of bank lending and account for more than half the nation’s bad debt, according to the finance ministry.
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