Slaska and Saint Louis Sucre close to terms
Just a month after they started, negotiations for the sale of Slaska Spolka Cukrowa, Poland's fourth-largest sugar holding, could be completed as early as next week, the Business Journal has learned.
Last month, French giant Saint Louis Sucre (SLS) was selected by the Treasury Ministry for exclusive negotiations to purchase Slaska. Since February, SLS had been vying with Germany's Sudzucker to acquire upward of 51% of Slaska, which is headquartered in the Opole voivodship. SLS, which was given until the end of May to close negotiations, said last week the process could be finished as early as May 10.
"Negotiations are moving forward. I am hopeful," said Leszek Podstawski, SLS's director in Poland.
SLS is the second-largest sugar company in France and the fourth-largest in Europe. It has been actively investing in Central and Eastern Europe. If successful in purchasing Slaska, the French would control 22% of the sugar market in Poland, the third-largest sugar producer in Europe.
Sugar-mill workers' representatives are also sanguine about progress at the negotiation table.
"I am optimistic," said Zygmunt Auguscik, chairman of the Solidarity trade union at the Slaska holding. "I think we will come to an agreement."
Finalization of the Slaska sale would be a significant step forward for the Treasury Ministry. For much of the last year, the ministry's plan to divest itself of Slaska, along with as many as 30 other mills, has been mired in controversy. The debate concerned whether the sugar sector would best be served by direct sales of mills to foreign investors or by the creation of one large, Polish-owned sugar cooperative called Polski Cukier, as many parliamentarians proposed.
Last month, the Council of Ministers and Finance Minister Leszek Balcerowicz threw their weight behind the Treasury Ministry's plan of direct sales, seriously deflating the Polski Cukier proposal. That support gave the ministry the green light to proceed with the Slaska tender.
The long-term controversy surrounding the fate of the country's sugar mills may be a factor in the fast pace of negotiations over the Slaska sale.
"The situation is so complicated that both sides want to come to an agreement as quickly as possible," Podstawski said.
Another factor is the holding's poor financial condition. According to management, Slaska's 1999 losses are expected to reach zl. 800 million ($190 million). In addition, 14 out of the 16 mills that make up the holding are barely solvent. Slaska's debt exceeds zl. 400 million ($95 million), Auguscik said.
"We are on the edge of bankruptcy,"
he said.
Over the past month, SLS has been carrying out negotiations on three fronts: with mill workers, sugar-beet growers and the state treasury.
The sticking point with mill workers is the length of employment guarantees and the amount of severance pay due to those who lose their job before that guarantee period is over.
Union leaders at Slaska are pushing for an employment guarantee period of six years. "We don't think this is realistic, but that's what we have written down right now," Auguscik said. For its part, SLS is proposing 36 months. "I think we will come to some sort of compromise,"
he added.
In addition to reaching an accord with mill workers, SLS and the Treasury Ministry will have to agree about the price and the French company's planned investment program for the holding. Negotiations with farmers are focused on giving guarantees for beet contracts and coming to an understanding about the method of setting the prices SLS will pay for raw materials.
SLS's Podstawski would not comment on the details of those negotiations. "I don't want to say anything right now since we are in the middle of the negotiation process," Podstawski said.
