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Selling businesses: rigidity will mess up the works
Which should be the top priority: trying to sell state assets for as much as possible or focusing on improving corporate governance?
Experts say it is now the right time to draw lessons from the episodes of businesses trying to sell themselves in recent days.
Vietcombank’s story
When Jeff Immelt, Chairman and CEO of General Electric, visited Vietnam late last year, he met leaders of the Bank for Foreign Trade of Vietnam (Vietcombank). It was an important part of his visit because GE was one of the foreign companies which wanted to become Vietcombank’s strategic partner.
The contents of the meeting between the GE leader and Vu Viet Ngoan, the then General Director of Vietcombank, were not made public. However, Ngoan left right after the meeting and he did not stay to attend the GE party.
People have since realised that Vietcombank and GE could not come to an agreement because the stake prices offered by Vietcombank were not acceptable for GE. The IPO average price at over VND100,000/share proved to be overly high for strategic partners. Sources say that strategic partners paid less than VND50,000/share when the stock market was hot.
Andy Ho, Managing Director of VinaCapital, an investment fund, said that in addition to the material value, strategic investors can bring ‘soft values’ (experience, technology, know-how and clients). Therefore, they think that it is unfair for them to pay market prices (the IPO average prices). And thus they pass on the deals.
While Bao Viet insurer has chosen HSBC as its strategic partner, Viecombank still cannot find one for itself. Meanwhile, the current difficulties of the national economy and the stock price falls have put Vietcombank at a disadvantage. Experts said that Vietcombank now cannot even sell stakes to foreign partners at the prices they once would have accepted because the bids only stood for a month. If Vietcombank wants to look for a strategic partner at this moment, it will have to sit for new negotiations.
Negotiators need to be more flexible
In fact, it was unfair to blame leaders of big banks and corporations for not making timely decisions.
One year ago, all people thought that it was the right time to sell stakes (the state’s assets) at high prices. A heavy burden was put on Vu Viet Ngoan and other leaders of big state-owned corporations at that time: they must not sell the state’s assets at low prices. Therefore, they chose a solution, the politically safest one – refusing the prices offered by foreign strategic partners.
Economists say that the Ministry of Finance’s regulation on selling stakes to strategic partners at prices equal to the IPO average prices has shown big shortcomings. The regulation has pushed some big corporations into a dilemma, making it difficult for them to find strategic partners.
They said that in the last time, the state only focused on trying to sell businesses at high prices, while treating lightly other values strategic partners could bring.
According to Trinh Hoai Giang, Deputy General Director of HCM City Securities Company, equitising companies should be sold to strategic partners at preferential prices approved by an appraisal council, gathering representatives of state agencies.
Businesses need to be more flexible in conducting negotiations and making decisions, as rigidity may mess up the works, said Andy Ho of VinaCapital.
VNN
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