Vietnam's Vinamilk on the block--will Abbott bite?

A move in the past week by Vietnam to say it wants to sell major stakes in state-owned companies might be a dealmaking cue for Abbott Laboratories ($ABT), which noted a sharp slowdown in nutrition sales in Vietnam in the second quarter.

One of the companies on the block is producer Vinamilk with the 45.1% stake held by State Capital Investment Corporation possibly worth as much as $2.5 billion, according to Vietnamese publication Tuoi Tre News.

Miles White, chairman and CEO, said on the July 22 call that outside of China, the company has seen a drop in nutrition sales in Vietnam where it holds the top spot in the market.

Abbott CEO Miles White

"The market in Vietnam has slowed I'd say kind of suddenly and a lot," White said. "And I don't think we're losing any share in Vietnam but we've certainly seen it slow and from time to time we see the impact of government price pressures and so forth, but do I expect that to be a sustained situation in Vietnam?"

"No, I don't. I can't always explain why any given market will suddenly take a breather but they seem to. And in this particular case Vietnam and Hong Kong both are impacting these numbers to a degree."

Deputy Prime Minister Ninh said that the country wants strategic investors for stakes in the 9 companies on offer from insurance to telecom in addition to Vinamilk, Tuoi Tre News said, adding that Vinamilk "dominates" the local market and its value has climbed 10 times over the past decade to around $5.47 billion now, citing data from Reuters.

An investment of this size and scope would not be unprecedented for Abbott. The company opened a Singapore-based nutrition research center earlier this year, and it's not shy about emerging markets either, with pharma-related purchases in Russia and Chile under White's watch.

In February, White outlined the size and scope of the global infrastructure for the nutrition business.

"Last year in our nutrition business we increased our local presence by investing in our global infrastructure. We opened three new manufacturing plants in China, India, and the U.S. And we partnered with the world's largest dairy cooperative, Fonterra, to invest locally in China's milk supply. These investments are a reflection of the strong underlying demand for our high-quality adult and pediatric products."

Abbott reports third-quarter earnings this week and was not immediately available to comment.

- here's the story from Tuoi Tre News

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