Ministry close to deal with SLS over Slaska privatization
After three months of talks, the Treasury Ministry and Saint Louis Sucre (SLS) last week appeared to have hammered out a final deal over the privatization of Slaska Spolka Cukrowa, Poland's largest sugar holding.
"All points in the contract are finalized," said Leszek Podstawski, director of the SLS office in Poland.
Since April, the treasury has been carrying out exclusive negotiations with SLS over the sale of upward of 51% of Slaska, which is headquartered in the Opole voivodship. In its agreement with the government, SLS was originally given until May 22 to close talks over the purchase of the holding. But the final sale was delayed due to an ongoing stalemate in talks with beet growers supplying Slaska mills and the bankruptcy of the largest of the holding's 16 mills. The most recent deadline for finishing negotiations passed July 10.
With the tug of war over Slaska complete, the contract will now be scrutinized by legal experts in the treasury before the final version is submitted to Treasury Minister Emil Wasacz for his signature, most likely by the end of the month.
"It's 100% sure that the contract will be signed by the end of the month," said Jozef Szymczyk, chairman of the Sugar Workers Federation.
The final deal hashed out between SLS and the ministry includes Slaska's largest sugar mill, Maloszyn, Podstawski said. In May, a Wroclaw court declared Maloszyn bankrupt, effectively excluding the mill from the privatization process. By 1999, Maloszyn had racked up debts of close to zl. 34 million ($7.7 million), with 1999 net losses reaching zl. 12 million ($2.7 million). Later this month, an appellate court is supposed to decide whether or not to recognize the earlier bankruptcy ruling. According to Podstawski, the court is likely to base its final judgement on the outcome of talks between SLS and the treasury.
"From what I know, the court is waiting for the contract to be signed," Podstawski said. "If it is signed, the factory will survive, if not, it won't."
Maloszyn pumps out 10% of the sugar produced by the entire Slaska holding, according to Szymczyk, who is also employed in the Maloszyn mill.
If the deal over Slaska comes to fruition, SLS would command 22% of the sugar market in Poland, Europe's third-largest producer. SLS is the second-largest sugar company in France and the fourth-largest in Europe.
The clinching of a deal by SLS comes on the heels of the announced pullout from the Polish sugar sector by Danisco Sugar, one of Europe's top three sugar producers, and its local partner Rolimpex. Two weeks ago, the two companies sold off their Polish sugar holdings to British Sugar Overseas (BSO) Polska for $20.1 million.
BSO first invested in two factories in Poland in 1989. While the acquisition will increase BSO's share of the domestic sugar market to 10%, it also brings to a close Danisco's six-year attempt to put down roots in Poland.
The lack of profitability in the sector as a whole, the standstill in the government's privatization program and the ongoing political controversy surrounding the future of Poland's sugar sector all played a role in the companies' pullout, said Andrzej Budzinski, vice president of the Rolimpex board.
Plummeting world sugar prices and unregulated domestic overproduction hit Poland's sugar producers particularly hard in 1999. "All companies on the market experienced dramatic loses last year," Budzinski said.
While Danisco and Rolimpex may have been willing to weather the storm in terms of short-term losses, the dispute over the future of Poland's sugar sector proved decisive in the companies' final retreat.
For more than a year, the sugar sector has been mired in controversy over whether its privatization should focus on bringing in foreign investment or if the industry should stay in Polish hands through the creation of one large cooperative, Polski Cukier.
With debts exceeding zl. 2 billion ($450 million) last year, the sugar sector would be best helped through the direct sale of mills to foreign investors, government officials long maintained. Under the original government privatization plan, the Slaska holding would be sold off in its entirety to foreign investors. The remaining three holdings would be broken up and sold off to foreign or Polish investors in small, regional groups of mills.
That government position was at odds with unionists and many Solidarity Election Action (AWS) parliamentarians, who supported the Polski Cukier idea of grouping as many as 30 now-independent mills into one large cooperative, effectively creating a sugar monopoly in Poland.
Instead of thinking about improving the functioning of sugar factories, lowering costs of products and competing on the market, some factory managers started contemplating gaining a market position through monopolistic practices, Budzinski said. "Some parts of the sector are propelled by monopolistic ideas, which is destructive to the branch itself," he said.
The tug of war over the fate of the sugar sector came close to paralyzing the former AWS and Freedom Union (UW) coalition government earlier this year. In January, the dispute over sugar played a key role in bringing about the no-confidence vote against Wasacz.
While in April the Cabinet dealt Polski Cukier proponents a blow by backing the treasury's privatization plans, that support proved too late for Danisco and Rolimpex. "(We) assess that further investments in state-owned factories will be of a too risky long-term nature for us to justify them at this time," said Danisco's executive vice president, Mogens Granborg, in a written statement.
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