Workers at May 10 Garment Company, which belongs to the Vinatex Group. Photo courtesy of the Ministry of Industry and Trade
Vietnam’s top textiles and garment maker, Vinatex, has been given approval to sell a combined 24 percent stake to two domestic property firms, among them Vingroup, ahead of the state-run firm’s IPO next week.
Vinatex will sell 10 percent to Vingroup, the country’s third-biggest listed firm by market value, and 14 percent to the unlisted Vietnam Investment Development Group, Vinatex said in a statement on its website (www.vinatex.com).
It is widely seen as one of the most attractive among a slew of more than 400 planned initial public offerings by firms the government is selling shares in to clean up a state sector rife with graft, inefficiency and debt on a scale that analysts say is hurting the broader economy
Vinatex dominates a local textiles sector that is set to gain strongly from trade pacts Vietnam is negotiating, including the 12-nation Trans-Pacific Partnership (TPP), which would see it replace China as the biggest garment supplier to the United States market.
Vinatex seeks to raise at least $63.4 million in the Sept. 22 IPO, offering 122 million shares, or 24.4 percent, to the public at a starting price of 11,000 dong ($0.52) each. The state will retain 51 percent and the remaining 0.6 percent will be sold to employees.
Te Vietnam National Textile and Garment Group, as Hanoi-based Vinatex is formally known, did not disclose the price of its share sales to the two potential strategic investors.
IPO and stock listings are two separate processes in Vietnam and Vinatex plans to list three years after the IPO, although that could happen sooner if the TPP is concluded early, its general director Tran Quang Nghi said in July.
Free trade focus
Garments and textiles are Vietnam’s second-biggest cash earner after cellphones, netting $18 billion in 2013, with the figure projected to rise to $24 billion this year. Vinatex estimates about two-thirds of that, however, is spent on importing materials, mainly from China.
That could all change due to “yarn forward” rules in the TPP that require raw materials to be made locally or sourced from TPP members, which would exclude China.
Vinatex’s choice of two property firms could be to take advantage of their other existing commercial operations, such as shopping malls, to distribute products to local consumers, said Pham Xuan Anh, head of investment banking at BIDV Securities, which has been working on the Vinatex’ IPO.
“Vinatex is targeting the domestic sector, a huge market that is currently dominated by China,” Anh said.
In a note last week to clients about the Vinatex IPO, Saigon Securities said free-trade deals under negotiation with the European Union, South Korea and others, would likely “strongly foster Vietnam’s textile and garment industry in the future“.
Vingroup, one of the fastest-expanding firms in Vietnam with interests in property, retail, hotels, entertainment and private schools and hospitals, said it was too soon to comment on any possible purchase of a Vinatex stake.
“Such actions should not be considered commitments or intent to proceed further“, the firm told Reuters in an emailed response to questions.
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