equitization process vietnam

8/11/2019 Equitization Process Vietnam

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1

Equitization Process


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3/19

Stages of Equitization

3

Stage 1

1992 1996: The Pilot Stage of the Equitizationprogram

Stage 2

5/1996 - 5/1998: Expansion of the Pilot Program

Stage 3

6/1998 5/2002: Acceleration of the EquitizationProgram

Stage 4

Continuing Equitization Program

Source: East Asian Development Network


4/19

4

Steps on Equitization

Equitizationplan

Establishment ofSteering Committeeand Assistant team

Documentation:valuation method,legal document,audited financialstatements andother related assetsapproval

Equitization Plan:Introduction, labor

planning, businessand equitizationplan, IPO method.

Initial Offering

Association with afinancial institute toIPO

Auction at thecompany/securitiescompanies/stockexchange

Completion

Shareholdersmeeting

Publicize

information aboutthe newly formed

joint-stock company

Hand over fromState-ownedenterprise to joint-stock company

Registration andLicensing

PostEquitization

RestructuringManagement

Audit appointment

Source: Ministry of Finance, legal documents on equitization, Deloitte


5/19

5

Market Regulation

Foreign Strategic Investors

Decree No.109/2007/ND-CP (26/06/2007)

Fundamental distinction between foreign investors and domestic investors

Foreign investors are defined as "foreign organizations and individuals injecting capital tocarry out investment activities in Vietnam

Companies established and operating in Vietnam are treated as domestic investors for thepurpose of investment in SOEs being equitized with a restriction

Restriction in investing on state-owned banks are more stringent and detailed: foreign creditorganization, asset size at least $20 billion , experience, reputation, etc.

Source: Ministry of Finance


6/19

6

Equitization Process

About 3,500 SOEs represent 40% of GDP

2007: 82 SOEs were equitized (21% planned)

2008-2010: Planned to rearrange 1,535 SOEs

Of which, 948 will be equitized

2008: Most equitizations were delayed

Explanation: Decline in stock market

June 2009: IPOs with reasonable starting price

2009: Plan to equitize some large banks, corp.

Source: Ministry of Finance, Doisongphapluat.com.vn, Deloitte and others

The State will retain ownership in:

100% - Public utilities, power transmission, oil and gas,aviation and railways

50% - Energy, mining, telecoms, infrastructure, cement andsteel production, sanitation and water supply, and bankingand insurance.


7/19

EquitizationTarget

State

corporations

(90)

State

corporations

(91)

Financials

Affiliated enterprises

of Ministries/local government

SMEs

Multiple sectorsSCIC

Vietnam Airlines Corp.

VNPT (SA M , Mobifone)

Vinatex

Vinashin (VSP , etc.)

EVN (PPC VSH , etc.)PVN (DPM PVC, etc.)

Etc.

Baoviet Insurance

VietPetro Insurance

Vietcombank

Vietinbank

BIDVMekong Housing bank

Agribank

Etc.

Equitization of SOEs in Vietnam

7Source: From various sources


8/19

Equitization Schedule of SOEs

2006 2007 2008 2009 2010

Financials

91 Corp.

90 Corp.

1992

3,756 116(21% of plan)

74 948(Out of 1,535 to be arranged)

(2003)

(28% of plan)

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9/199

123

251

211 205

164

539

715724

255

116

74

20

0

100

200

300

400

500

600

700

800

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1H/2009

Number of Equitization Transactions

Source: Ministry of Finance, Deloitte and others


10/1910


11/19

Decision 06/2006/QD-TTg => VNPT Group

Chartered capital: $2 bil

67 subsidiaries (40 equitized)

Well-known brands: EMS, Vietnamnet, 1080, and

Mobifone

41% market share

Revenue $1 bil, profit margin 35% (2008)

Equitization plan

Market value: $2 bil (Credit Suisse)

License for 3G service

Award Best telecom company in 2008

Vinaphone

20% market share

Equitization planTelecommunication Financial services

Post Information Technology

Vietnam Posts & Telecommunications Group (91 corp.)

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12/19

Decision 69/QD-TTg => Vinashin Group

76 subsidiaries & 12 allied companies

4 JVsHuyndai-Vinashin shipyard joint venture

($160 mil)

Revenue: $1.7 bil in 2008 (48% growth) & est.

$2.5 bil in 2009

2006-2010 plan:

Upgrading ship building technology and

equipments, increasing the localization to 60-

70%

2010: building ships of 100,000 DWT,

repairing ships of 400,000 DWT,manufacturing and assembling the

equipments for shipbuilding

Looking for foreign partners which possess

high technology of shipbuilding to cooperate

and form modern shipyards.

Shipbuilding

Vinashin Ship Building Group (91 corp.)

Financial services

Civil Engineering

Foreign trading

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13/19

Decision 48/2006/QD-TTg => EVN Group (53

subsidiaries) - the only electricity distributor in VN

EVNs capacity of 12,000 MW, generating 57.44

bn kWh/year (70% of national demand)

Increasing capacity to 15,000 MW in 2009

Son La hydropower plan: capacity 2,400 MW,

providing 10 bn kWh/year (biggest plant in Aseanarea) => start operating in 2010

Equitization process

2008-2008: 29 subsidiaries equitized

Since 2009 :

Reduction of current holding in itslisted subsidiaries (VSH, TBC, PPC)

Preparing for equitization of its

subsidiaries and waiting for the stock

market to recover => higher capital

surplus

Electricity production Electricity distribution

Telecommunication Financial services

Vietnam Electricity Group (91 corp.)



14/19

Decision 199/2006/QD-TTg => PVN Group

20 subsidiaries (13 equitized)

5 allied companies

2008: Revenue of $16 bil (20% GDP), export

of $11.15 bil

2009: Revenue of $3 bil, export of $1.45 bil

Exploration activities in many other countries

(Nicaragua, Peru, Indonesia, Algeria, etc.)

Equitization plan:

2Q/2009: Hanoi oil & trading services

Co. ltd., PVN machines & accessories Co.

ltd., Hue petrol & gas Co. ltd.

2010: Dung Quat refinery: 2.6 mil tons

(30% national demand)

Financial services

Oil /gas exploration,exploitation, & refinery

Transportation

Fertilizer

Vietnam Oil & Gas Group (91 corp.)

Gas Electricity

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15/19


16/19

Opportunities for Investors

16

Clear commitments to equitized State Owned Enterprises in to Limited Liability or Joint Stock Companies andoperate under the Enterprise Law by July 20

The process is supervised strictly with a directive enforcing equitization plans needed to be submitted to thePrime Minister by the third quarter of 2009

The State Owned Companies will be evaluated at the fair price to reflect its true value with consideration ofadvantage value, i.e. geography location, brand name and development potential.

Plans for pilot projects have been discussed to establish holding groups of corporations from the existingState Owned Companies

The State Capital Investment Corporation (SCIC) has targeted the reduction of interests in some enterprisesso that by2012, SCIC will hold controlling takes interests in about 100 enterprises indispensable to the State

90 percent of more than 332,500 small and medium sized Vietnamese Companies are in need of the capitalinjection to further their operations

Vietnam was less affected by previous financial crisis because of the Governments good economicmanagement

Health and education sectors would be expected to appeal to foreign investors

Ongoing reforms to speed up the approval procedures for investors investment.

WTOs commitments provide more opportunities for foreign investors

Experienced foreign investors might significantly surpass the local investors in figuring out investmentopportunities

Source: Deloitte


17/19

Challenges for Investors

17

Less opportunity for foreign investors to invest in some industries

The State continues to maintain controlling interest in some equitizedcompanies

Foreign investment in certain industries remain restricted

Equitization agenda was not conducted on time and not committed to be ontime

Complicated procedures within the equitization process

Most of equitized companies are Small, Medium Enterprises that are not

attractive to foreign investors

Transparency is the main issue in terms of company valuation, informationproviding, etc

Economic uncertainties: postponing or re-negotiating of proposed equitization

planSource: Deloitte


18/19

Problems of M&A in Vietnam

Arbitrary and time consuming procedures to determinepermitted scope of activities for acquisition

Unclear and absence of uniform practice in issuance of anew Investment Certificate or modification of BusinessCertificate

Post acquisition pertaining to Land Use Rights of acquired

companies Registration for amendment of investment

certificate/business registration certificate of LLC withtwo or more members in case of changing of membershiparising from assignment of equity interest

Funding sources and related tax treatment

Restructuring

Listing protection

18Source: Gide Loyrette Nouel


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Q & A

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equitization process vietnam

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