Divestment from VEAM Corp hampered by joint venture commitments

At a recent investor meeting, state-owned truck maker Vietnam Engine and Agricultural Machinery Corporation (VEAM) revealed that the divestment plan was still unclear.

While the Ministry of Industry and Trade (MoIT) has planned to reduce its ownership in the corporation from 88.5 percent to 36 percent, it is unclear how long this is supposed to take, when issues have recently arisen regarding provisions in VEAM’s joint venture agreements with Japan's Honda and Toyota.

VEAM and Toyota agreed to establish a joint venture, Toyota Vietnam in 1995, agreeing to end the partnership in 2035. The agreement has provisions relating to the acquisition of VEAM's stake in the joint venture, should the state reduce its ownership to below 51 percent. 

The joint venture between VEAM and Honda was established in 1996, with an agreement that it will hold good for 40 years. VEAM owns 30 percent of the joint venture's charter capital, Honda Motor Thailand, 28 percent, and Honda Motor Japan, 42 percent.

Although the joint venture agreement does not give Honda the right to acquire shares in VEAM per se, Honda can activate a provision to do so if VEAM's stake is being bought by another entity in the same industry and this poses a potential threat to Honda Vietnam’s business.

Negotiations with these joint ventures will force the MoIT to carefully consider its divestment plan from VEAM, according to brokerage house Ho Chi Minh City Securities JSC (HSC).

Although VEAM has not completed procedures related to its initial public offering, the corporation aims to list on the Ho Chi Minh City Stock Exchange this year.

VEAM was established on May 12, 1990 with a government aim to help the industrialization and modernization of the agricultural sector and rural areas.

On January 18, 2017, VEAM was equitized, and has been operating as a joint stock company since.

VEAM's profit in 2018 was mainly driven by shared profits from its automobile joint ventures.