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Business

Hanoi to divest Vinamilk shares this year

HO CHI MINH CITY -- Vietnam will divest state shares in Vietnam Dairy Products worth around $4.48 billion by the end of this year, according to the finance ministry.

The announcement follows Prime Minister Nguyen Xuan Phuc's order in late August to speed up divestments from 10 state-owned companies and two unlisted breweries, Saigon Beer Alcohol and Beverage Corp. (Sabeco) and Hanoi Beer Alcohol and Beverage Corp. (Habeco).

The sell-offs are intended to offset the national deficit, which has increased to 6.6% of gross domestic product. They are being tied to a timetable for the first time, pleasing prospective investors.

Following Vinamilk, Bao Minh Insurance Corp., Binh Minh Plastics, FPT Corporation and FPT Telecom, will be among nine companies that will see divestment in 2017.

The government last year expected the 10 companies to yield only about $3 billion, and foreign ownership limitations are being lifted.

To complete the Vinamilk sale in the fourth quarter this year, a solid investor will be needed, and the leading candidate is Singapore-based Fraser & Neave (F&N) the second biggest shareholder in Vinamilk after Vietnam's State Capital Investment Corporation (SCIC), which has a near nearly 45% stake.

Last year, local media reports suggested F&N was prepared to pay $4 billion for outright ownership. F&N refuted that, but a source at Vinamilk confirmed that F&N is certainly keen to increase its stake from 10.95%. Companies from Japan, South Korea, and Thailand have also shown interest.

F&N wants to expand in Southeast Asia through mergers and acquisitions, and Vietnam's dairy production is relatively well developed by regional standards. With a population of 94 million, annual dairy consumption per capita was around 19 liters in 2015. Consumption levels in China, Malaysia, the Philippines, and Thailand are higher, however, ranging from 22 to 51 liters.

Vinamilk is celebrating its 40th anniversary this year, and has some 200 products. It aims to increase its share of the liquid milk market from 53% to 60% and for powdered milk from 40% to 50% over the next five years. It also has a 4 trillion dong ($180 million) budget for overseas acquisitions, and hopes to conclude negotiations in New Zealand and the U.S. next year.

Vinamilk signed a three-year strategic cooperation agreement on Tuesday with Switzerland's Nutritional Product Corporation to improve its products, and specialized milk formulas. At present, 25% of Vietnamese children under five are malnourished.

(Nikkei)

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