1. Second attempt to privatise Odesa Port Plant
The State Property Fund of Ukraine (the “Fund”) has announced that there will be a repeat attempt to privatise Odesa Port Plant PJSC (the auction date to be announced shortly). The previous attempt to privatise this asset with a starting price of UAH 13.175 bn. (ca. USD 521 mln.) earlier this year failed, with not one bidder participating. It is hoped therefore that a much lower starting purchase price of UAH 5.16 bn. (ca. USD 201 mln.) will help to garner greater interest.
The winning bidder will however be required to commit to a number of post-acquisition covenants for a period of 5 years, including an undertaking not to dismiss employees without trade union consent, to introduce innovative technologies, not to dispose of key assets without the Fund’s consent, and to procure the repayment of outstanding debt to Naftogaz Ukraine (estimated at UAH 148 mln. (ca. USD 5.8 mln.)).
2. Further companies added to the privatisation list
The Government has added further 126 companies to the list of companies slated for privatisation in 2016/2017, including Turboatom, United Mining and Chemical Company, Elektrovazhmash, the State Food and Grain Corporation of Ukraine, and Zaporizhzhia Titanium and Magnesium Combine. It has also prepared a summary guide for potential investors.
3. Privatisation rules amended
The privatisation rules have also been amended such that potential bidders may now submit a bank guarantee as part of the bid, instead of a cash deposit. The bank guarantee must be in a form acceptable to the Fund (it is not yet clear what the procedure around that will be), and must be issued by a bank (it is not yet clear whether or not the bank needs to be incorporated in Ukraine) with a credit rating of BBB or higher, and which is not currently in litigation against any Ukrainian state body.
4. Summary of the privatisation procedure
The privatisation procedure is therefore now as follows:
- The privatisation process is launched, and bidders will then be given the opportunity to carry out due diligence;
- Each bidder will have an opportunity to submit its comments on the SPA, following which the Fund will then circulate a revised form of SPA which bidders will need to accept (if they want to participate further in the process) on a ‘take it or leave it’ basis;
- The auction will then take place within 30 – 45 days following the launch date (the “Auction Date”);
- By no later than 5 business days prior to the Auction Date, a bidder who wishes to participate in the auction will be required to submit a suite of tender documents, and provide confirmation that it has deposited 5% of the purchase price into a bank account to be identified by the Fund. Alternatively, it can submit the bank guarantee as discussed above;
- The winning bidder will then be required to enter into the SPA with the Fund within 7 business days after the Auction, and the balance of the purchase price must be paid within 30 days after the SPA is notarised;
- Share title will only be transferred however within 3 days from the date of payment of the purchase price, or from the date on which antimonopoly consent approval is obtained, whichever is later;
- Losing bidders should receive their deposit back in most circumstances.