After some 70 expressions of interest, the Special Purpose Unit (SPU) received 10 submissions by yesterday’s deadline for bids for the Skeldon, Rose Hall and East Demerara estates.
The lower than expected number has been attributed to uncertainty over the functionality of the estates and concerns about competition from the state-owned GuySuCo.
“The major concerns of potential bidders related to regulations that are needed to ensure fair competition [with] government, that is, the legacy, GuySuCo,” Wilfred Baghaloo, Managing Director (Deals) of PricewaterhouseCoopers (PwC) Tax and Advisory Services Limited told a press conference yesterday.
“Part of the concern was that a lot of people were worried—‘What are we really buying? Are we buying scrap metal or going concerns?’ There was also concern about the regulatory environment…‘How do we compete with government?’” he added.
PwC, was contracted by the SPU of the National Industrial and Commercial Investments Limited’s (NICIL) and last year began doing valuations of the assets of GuySuCo in order to secure prospective investors.
Baghaloo told reporters that he could not give the names of the bidders until the documents were sorted and it was determined if the ten envelopes were individual bids or multiple bids from one company. But while he could not name the companies, he said local and regional companies dominated the submissions as only one bid came from an international company. That international company, Baghaloo said, is registered in Florida but has Middle Eastern connections. “We got ten envelopes but that doesn’t mean we got ten bids and we are not able to determine that,” he explained.
Government had announced that it received over 70 expressions of interests for the purchase of the estates from companies around the world. Some companies had signaled then that they were interested in buying all of the estates.
But Baghaloo said that only 12 information memorandums (IMs) were sold. As a result, they were entities eligible to submit a legitimate bid. The IMs were sold at US$1,000 each.
Baghaloo also said PwC received requests to extend the process from at least three potential bidders. “Many of the extensions are driven by the fact that the factories were closed for a long period of time and, as such, the due diligence was challenging. However, the reopening of some of the factories would have sparked more interest in the bidding process, in particular from the international market,” he said.
The SPU and PwC in September held an interactive session for potential investors at the Marriott Hotel, Georgetown.
Then, only about 17 companies participated. Head of NICIL Horace James had told this newspaper then that he was not worried about the number since it did not necessarily reflect those who would have purchased the information memorandum. He reasoned that cost of travel to Guyana and the time availability for the one-day event might have also been factors.
He had explained, too, that he was hoping for the sale of the estates by February next year.
James said, “We had a meeting for potential investors and if they [wanted] any clarifications on the document, they could ask there. With the purchase of the document, those persons now have access to what we call a virtual room, a kind of library where they can get all kinds of information. If questions are asked by one company, we give the answer to not only that company but to all, without naming who asked of course, so as to have it open and make it clear to as much persons as possible. The information memorandum itself is to ensure a transparent process.”
He added, “It was a good session and they had to sign a confidentiality agreement when they [got] the information memorandum. We explained the document, also the scoring system that will be used in the evaluation and we had some questions about that. We had good feedback from those who bought and this was done in an open public forum where whatever you give to one, you give to all and that is the same with the IM.”
This was reiterated by Baghaloo, who gave reporters a sample of one of the IMs, explaining its content.
He explained that the section dealing with evaluation of the offers was very important to bidders, who were given details and directions in the document of what is required of them and what the process will entail.
The bidders would be scored, Baghaloo said, on a point system where 70% of their score will come from a technical analysis and the other 30% from the financial analysis.
Bidders were told that they have to strictly abide by government’s terms that only cane can be grown at the estates but they are not limited to using it only for sugar production. “The primary objective of the government is to get qualified, experienced, competent and well-structured proposals to operate the factories for the foreseeable future and that is why the technical component is more weighted in the scoring process. We also reminded the potential bidders that we wanted the three estates to remain [in] the cane industry and not necessarily the sugar industry,” Baghaloo said.
“What would happen to the thousands of workers who were already trained and that is their breadline? This is something that was made very clear to the investors when we met at the Marriott—that there would be some importation of labour but that’s mainly the technical people if they can’t find them here but our casual workers have to be employed,” Privatisation Specialist at the SPU Shawn Persaud added.
The main rationale behind this move, Persaud said, was to ensure that the laid off workers are absorbed back into the workforce and for the bidder to appreciate the infrastructure already built. “They have already got the knowledge… somebody coming to plant potatoes would not understand the infrastructure we already built there. They can go into virgin land…,” he stressed.
After the bids have been submitted and evaluations completed, it will be Cabinet that will make a final decision. “PwC would give the score, because they will use a scoring system for the business plans as they evaluate them in terms of technical and financial aspects and that sort of thing. They will look at the bids, score, make their evaluation and recommendations but we still have to submit to Cabinet,” James had previously explained, while noting that Cabinet will make a decision on the information that PwC and the steering committee submits.
“I hope we are talking early next year. Yes, I hope by then [the end of February] that we would see them sold off,” he added, when asked about an expected completion date for the divestment process.
But PWC has reminded that government reserves the right to not accept any one bids received and could opt to reopen the process, should it be deemed necessary.