Slaska sell-off progresses amid chaos
Against the backdrop of a crumbling government coalition, Treasury Ministry negotiators, foreign investors and farmers were scrambling last week to strike a deal over the sale of Slaska Spolka Cukrowa, the country's largest sugar holding, before the deadline for completing talks passes today.
While negotiations appeared near collapse last week, by press time Friday the government and French giant Saint Louis Sucre (SLS) looked close to hammering out a final deal that sources said could be signed as early as the end of this month.
"It's going well," said Pawel Jagiello, president of Pro-Invest International, the Treasury Ministry's adviser on the Slaska privatization process last Friday. "We're finalizing the agreement and we're at the very last stage."
In April, the state treasury selected SLS, which had been vying with Germany's Sudzucker, for exclusive negotiations to purchase upward of 51% of Slaska, which is headquartered in the Opole voivodship in southern Poland. In its original agreement with the government, SLS was given until May 22 to close talks over the purchase. Due to an ongoing deadlock in talks with beet growers supplying Slaska's mills, the government granted SLS an extension period that ends June 12.
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, and if successful in purchasing Slaska, could control 22% of the sugar market in Poland, the third-largest sugar producer in Europe.
While prospects of reaching a final deal appeared brighter by the week's end, the impasse in talks with beet growers, the declared bankruptcy of the largest of Slaska's 16 mills and the collapse of the governing coalition last week all worked against a final deal being concluded in time.
As far as beet growers are concerned, one of the main sticking points in the negotiations during the last month has been over how the French will calculate the price for the sugar beet they contract with Polish farmers. Farmers want SLS to accept a fixed formula for calculating price, while the French sugar producer has been pushing for purchase price to be renegotiated on an annual basis.
Since farmers and SLS were unable to reach an agreement by Friday, the ministry was poised last week to sign off on a package in lieu of farmers to ensure that Slaska's privatization takes place.
"The ministry is prepared to make a deal happen by getting involved in negotiations directly," Jagiello said. "I think the ministry should set the parameters so that it will be worth it for both growers and producers."
Talks also came close to a halt after a Wroclaw court declared the bankruptcy of one of Slaska's 16 sugar mills the week before. While the court ruling is now in appeal, the prospects of the Maloszyn mill being excluded from the privatization process not only meant that Slaska might lose its luster to the French, but also that the price tag the government could demand for the mill would definitely be lower.
As Slaska's largest mill, Maloszyn commands 8% of the holding's total 300,000 tonne government-assigned limit. The government regulates how much each mill, or grouping of mills, can produce to keep sugar prices stable.
"If it turns out that one mill will be excluded that means we will have to renegotiate," said Leszek Podstawski, director of SLS' representative office in Poland.
By week's end, talks over the sale of Slaska were moving ahead on the assumption that Maloszyn would be apart of the deal, Jagiello said. Maloszyn's management submitted an appeal last week to the courts to reverse the bankruptcy ruling, arguing that the mill's privatization would mean debts would be paid off or restructured.
"We are working on the premise that the decision will be revoked," Jagiello said.
The collapse of the ruling Solidarity Election Action (AWS) and Freedom Union (UW) coalition also had an impact on the talks. With AWS now alone at the helm, opposition to the privatization of the sugar industry is likely to grow, and Emil Wasacz's position as head of the state treasury appears increasingly tenuous. Since last year, a group of AWS parliamentarians have ardently opposed Wasacz's plan to sell off the sugar industry to foreign investors, and pushed to keep the sugar industry in Polish hands through the creation of one large cooperative. "Wasacz's position is very much in danger now," said Jan Wyrowinski, a UW deputy from Torun.
If Wasacz goes, the government's privatization program for sugar could be at risk. Under the original government plan, Slaska 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.
According to Wyrowinski, the privatization of groups of mills near Torun, Poznan and Szczecin have already come to a complete halt. However, Wyrowinski could not comment on the consequences of further government changes for Slaska.
The uncertainty wrought by the recent governmental crisis may actually benefit Slaska's sell-off in the short term. According to one source close to the privatization process who wished to remain anonymous, the prospects of growing opposition to privatization may have propelled all parties involved in negotiations to seek compromise and bring the sale to completion. "All sides have come to the realization that drawing things out any longer could only harm (the deal)," the source said.
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