Choosing strategic partners: Vietcombank at disadvantage

Wednesday, April 23, 2008
Vietcombank is thought to be at a disadvantage in negotiating with foreign investors to choose strategic partners, especially in relation to share prices.

One of the most important topics to be raised at the shareholders’ meeting of Vietcombank, slated for April 26, will be the selection of foreign partners.

In fact, there is one special thing in Vietcombank’s equitisation process: the government decided to make IPO first and then look for strategic partners. The change ‘at the last minute’ originated from difficulties in negotiating about stake sale prices with candidates.

As Deputy Prime Minister Nguyen Sinh Hung instructed, the stake prices for strategic partners must not be lower than the average IPO price. And the instruction has been putting big difficulties on Vietcombank.

Vietcombank’s shares are selling at VND53-55,000/share only on the OTC market, much lower than the average IPO price at VND107,572/share, and even lower than the preferential price level at which stakes were sold to Vietcombank’s staffs.

A question has been raised for Nguyen Hoa Binh, Chairman of Vietcombank: if the low price of Vietcombank’s shares on the market puts Vietcombank at a disadvantage when negotiating with candidates, could candidates take advantage of this to force the price down?

Binh said that Vietcombank has anticipated this, but declined to give an answer, reasoning that the issue was not listed among the issues he was authorised to provide information about.

However, Binh said that the low price of Vietcombank’s shares on the OTC market would be an advantage to the sellers. He said that share price decreases are undeniable, and that the price is decided by the market’s supply and demand.

Binh declined to give information about the prices candidates offered.

Besides sale prices, the time to sell stakes is also a problem for Vietcombank, indirectly creating advantages for candidates. It is clear that in the first shareholders’ meeting, Vietcombank will still not have foreign strategic partners, and it is highly possible that it will not have them when it lists on the bourse.

The prolonged process of selecting foreign strategic partners will affect shareholders’ thoughts, as shareholders want to inject money in a company where everything is ready. Therefore, the presence of strategic partners at the listing moment has significance.

However, Binh said that Vietcombank will settle the problems step by step, with the priority to be given to urgent matters.

Binh said that Vietcombank will not get strategic partners at any cost. He said that the selection of strategic partners must serve the benefit of Vietcombank’s shareholders and the country, while the bank will not aim to seek short-term financial sources.

No exact date has been set about when Vietcombank must finish selecting strategic partners; therefore, the time to sell stakes is not an issue at the negotiating table. However, Binh has revealed that the bank wants to complete the work in 2008.

In fact, many foreign investors have expressed interest in buying Vietcombank stakes. Besides the negotiations with existing candidates, Vietcombank is also working with new names.

Binh has confirmed that despite the difficulties, Vietcombank will not ease the requirements on strategic partners. (TBKTVN)