Singapore Wealth Fund Hits Snag on Vietnam Deal Approval

  • Local authorities withhold approval on Vietcombank investment
  • GIC agreed in August to purchase 7.7% of biggest listed bank

Singapore sovereign fund GIC Pte has hit a snag as it seeks government approval for its planned investment in Bank for Foreign Trade of Vietnam JSC, the nation’s biggest lender by market value, people with knowledge of the matter said.

The deal, originally expected to be completed by the end of 2016, hasn’t yet been approved by Vietnamese authorities, according to the people. The government has withheld approval in part because GIC proposed to buy stock in Vietcombank at less than the market price, the people said, asking not to be identified because the information is private.

Shares of Vietcombank have risen 36 percent in the past 12 months, giving it a market value of $6.2 billion. The lender trades at about 3 times book value, compared with an average 1.1 times for listed Vietnamese banks, data compiled by Bloomberg show. The bank’s shares fell 0.4 percent at 11:48 a.m. Wednesday in Ho Chi Minh, while the benchmark VN Index rose 0.3 percent.

“The market knew it was coming, so by the time the deal was announced, the market price had moved,” said Kevin Snowball, chief executive officer at PXP Vietnam Asset Management in Ho Chi Minh City. “I would be surprised now if the deal happens.”

Vietnam has been seeking foreign investments to boost economic growth and strengthen its financial system, which has been hobbled by a surge in non-performing loans to state-owned companies. The country will increase the limits of foreign ownership in local lenders as early as this year, Prime Minister Nguyen Xuan Phuc said in a Jan. 13 Bloomberg Television interview.

Preliminary Pact

GIC said in August it reached a preliminary pact to buy 305.8 million new Vietcombank shares, equal to a 7.7 percent holding. It agreed to buy the stock at a discount to the market price, for a total of less than $400 million, people with knowledge of the matter said at the time. The parties said they aimed to complete the deal by the fourth quarter last year, subject to further negotiations and regulatory approvals.

The Vietnamese government hasn’t made a final decision to block the deal, and GIC may be able to reapply for approval, according to the people. A GIC investment would help Vietcombank prepare for higher capital requirements, and the sovereign fund intended to offer technical assistance and support to the bank, the August statement said.

Representatives or officials at GIC, the Vietnam government press office and the central bank’s press office declined to comment. Vietcombank Chairman Nghiem Xuan Thanh and Chief Executive Officer Pham Quang Dung didn’t answer phone calls seeking comment.

Vietcombank’s biggest shareholder, the State Bank of Vietnam, owns 77 percent of the lender, while Mizuho Financial Group Inc. is its second biggest shareholder, with 15 percent, according to Bloomberg-compiled data.

— With assistance by John Boudreau

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