Vietnam’s leading dairy producer Vinamilk last week proposed that the government and the lawmaking National Assembly lift the barrier to allow foreign investors to own up to 100 percent of the company.

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As dairy manufacturing is not a sector affecting the country’s food security, as described by the government, raising the foreign ownership in Vinamilk would cause no harm to the national economy, according to a document the firm sent to the prime minister and the National Assembly Committee on Finance and Budget. 

If the bar is lifted, the State Capital Investment Corporation (SCIC), which manages the government’s stake in Vinamilk, will find a proposed divestment of the state capital from the dairy corporation easier and more profitable, Vinamilk said in the document.

A transparent public auction of the remaining state capital in Vinamilk would facilitate the participation of qualified foreign investors given its business status, the firm added.

Currently, foreign investors are allowed to own up to 49 percent of Vinamilk, as regulated by the government, and the foreign sector has already reached that cap.

With a capitalization of $1.14 billion, as valued by London-based brand valuation consultancy Brand Finance, Vinamilk believes that lifting the bar for foreign investors would not lead to the elimination of the Vietnamese dairy brand, but would instead help introduce it to more regional and world markets.

Also in its proposal, Vinamilk said that its shares are valued by many financial institutions at around VND120,000-150,000 ($5.4-6.75) each.

Given the current price range, the SCIC can collect at least VND64.9 trillion ($2.9 billion), or up to VND81.15 trillion ($3.6 billion), the dairy producer said in the document.

In addition, SCIC, which holds a 45.1 percent stake in Vinamilk, will soon announce a clear timetable for the divestment so that investors can be well prepared.

Vinamilk suggested SCIC, whose capital in Vinamilk is worth some VND60 trillion, should divest in no more than three waves to auction at least 10 percent stakes in Vinamilk in each wave.

The document was submitted after the government announced its plan to divest from many big firms, but the specific roadmap, determined by the SCIC, has yet to be revealed.

The Vietnamese government last month said it will divest all of its shares in ten enterprises, including major firms such as Vinamilk, Vietnam’s largest dairy producer, giant telecom firm FPT Telecom, and leading insurer Bao Minh, which could earn it a total of $3 billion.

It is "a favorable moment to divest from Vinamilk,” due to good macroeconomic conditions, and the increasing attractiveness of the Vietnamese stock market after the member countries of the Trans-Pacific Partnership (TPP) pact reached a landmark agreement on October 5, the Vinamilk document said.

The TPP deal, which aims to liberalize commerce in 40 percent of the world's economy, was finalized following many sessions of negotiations in Atlanta, and is now pending approval by lawmakers in all the 12 TPP countries, which include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam.

The SCIC has already divested from Vinamilk three times in the form of auctions, and the monies the state has collected via those auctions were much higher than the starting price.

Vinamilk also recommended hiring a professional international financial advisor to hold an auction for the greatest benefit to the state.

The proposal was submitted to the government after there were reports that representatives of Singaporean beverage conglomerate Fraser & Neave Limited (F&N) had contacted Vinamilk for a talk to buy the SCIC’s stake in the firm for $4 billion, or VND167,000 per share, according to The Saigon Times Online.

However, F&N, which currently holds more than 11 percent and has a representative on the board of directors of Vinamilk, on Tuesday last week said it had not brought forward any such offer to either Vinamilk or the SCIC.

In the first nine months of this year, sales of Vinamilk topped VND29.87 trillion ($1.24 billion) and its after-tax profit hit VND5.87 trillion ($267.15 million), up 35.3 percentyear on year.

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