The Cabinet of Ministers of Ukraine has approved the privatisation terms (“Terms”) for Odesa Port Plant PJSC (“Odesa Port Plant”) positioned as one of the most attractive privatisation assets. The Terms envisage that 99.567% of Odesa Port Plant’s shares will be offered for sale at the starting purchase price of UAH 13.175 bn. (ca. USD 521 mln.).
Also, the State Property Fund (the “Fund”) has recently announced the date for holding a privatisation auction for Odesa Port Plant. The auction will be held on 26 July 2016 at the premises of the Fund. The final deadline for submission of the bids by the prospective buyers will be 18 July 2016, whereas any comments to the draft sale and purchase agreement to be entered into with the Fund will be accepted no later than on 11 July 2016.
In order to participate in the auction, among other things, the buyer will need to pay a guarantee payment in the amount of UAH 658,750,000 (ca. USD 26 mln). In many cases, such guarantee payment will not be returned to the prospective buyer and, in particular, if such buyer did not comply with the Terms. Such payment will also not be refunded to the winner of the auction (but will be credited towards the purchase price) and in case the winner failed to obtain the approval of the Anti-Monopoly Committee of Ukraine for the acquisition of Odesa Port Plant.
The Terms envisage a number of obligations to be imposed on a prospective buyer in case of winning the auction. In particular, the prospective buyers should be prepared to undertake, among others, the following obligations for a period of five years from the date of acquisition of Odesa Port Plant (unless other term is expressly provided in relation to a specific undertaking):
- to preserve the main activities and the range of main goods and services;
- to provide services in compliance with the terms of existing contracts;
- to pay timely all due taxes and contributions;
- to pay timely salaries and related payments to employees;
- to refrain from decreasing a number of employees without an approval from the trade union;
- to procure due maintenance and storage of state property which was not contributed to Odesa Port Plant’s charter capital in course of its incorporation but was put on its balance;
- introduction of innovative technologies in 2017-2021 pursuant to a program to be developed and approved by the buyer until 1 April 2017;
- from the date of the acquisition and until full execution of the underlying sale and purchase agreement, to seek a prior approval from the Fund for making decisions at Odesa Port Plant’s general meeting of shareholders regarding (i) increase/decrease of charter capital, change of share nominal value, change of corporate form and (ii) disposal of assets with a value exceeding 10% of total assets as of last year’s financial statements (unless such disposal is done in the ordinary course of business).
The approval of the Terms and setting the auction date confirm the government’s intention to sell Odesa Port Plant in 2016 which, if followed through, may serve as a positive signal to investors. Our view, however, which has been echoed by the international financial community - is that the terms of the privatisation are such that it is somewhat likely that the pool of investors which will participate in this auction may well be significantly smaller than would otherwise be the case had the privatisation been carried out in accordance with more traditional western standards.