Mysterious intentions behind $316-million deal of acquiring Vinaconex

An Phu Hung, a small construction company with limited financial capacity, has recently spent over $316.2 million on acquiring a 58 per cent stake in Vinaconex from State Capital Investment Corporation (SCIC). This price is 35 per cent higher than that offered by SCIC and 56 per cent higher than the market price of Vinaconex on the auction day.

Economists find this deal mystifying. What makes the bidder willing to spend such an overwhelming amount of money on gaining control of Vinaconex? These years, Vinaconex’s business results have been dull, except for the surge in last year's profit which came from the divestment of a subsidiary. Construction and real estate, which are Vinaconex's two main businesses, did not contribute much to this surge.

Cam Pha Cement Joint Stock Company, a Vinaconex project, may be a factor to attract the investors to this deal. It was once a crippling burden for Vinaconex in the past. 

By the end of 2013, Vinaconex sold 70 per cent of shares to Viettel and lent $90 million to Cam Pha Cement. Under the management of Viettel, Cam Pha Cement started to earn a profit. As a result, the cement company started to repay the mentioned loan in 2016. According to the plan, in the next three years, the loan will be entirely repaid to Vinaconex.

Apart from the appeal of Cam Pha Cement, Vinaconex's land fund of 3.2 million square metres is also considered a big plus. However, the chairman of an M&A consulting firm stated that most of this land fund was rented for business and leasing. The two most prominent projects in this land fund are the 277-hectare industrial park project at Hoa Lac Hi-Tech Park and the 246-hectare Splendora urban area. Finding ways to effectively exploit these two projects is challenging for Vinaconex.

The land fund at Hoa Lac Hi-Tech Park is leased for 49 years as industrial park infrastructure. However, so far, only about two-thirds of the area has been cleared. Tackling the remaining area will take a lot of time and cost.

The Splendora urban area can be a headache. This project was jointly invested by An Khanh New City Development Joint Venture Company Limited. This company belongs to Vinaconex, which holds 50 per cent of their shares, and Phu Long Real Estate Joint Stock Company, which now replaces with former partner Posco E&C. 

After the first phase, the development of this project has been stagnant since 2014. This joint venture is burdened with a massive debt of nearly $257.6 million.

According to this expert, besides the challenge of mobilising enough $316 million to buy SCIC's shares within next week, the winning bidder would have to mobilise their resources for the joint venture if they want to exploit the Splendora project. With such a struggle, the intentions of the bidder remain unanswered.