Imuna, Slovakia's only processor of blood plasma, fetched one Slovak crown in the first tender for its sale. The government later snatched victory from Slovak-American buyer Interaqua, amid doubts over its financial strength.
The cabinet's Council of Economic Ministers - made up of the Economy, Finance and Privatisation Ministers and Deputy PM Ivan Mikloš - said they had overturned Interaqua's victory because of concern the firm didn't have the money to cover the investments it was obliged to make into Imuna.
But Interaqua officials rejected the government's reasoning, and accused it of violating the principle of transparency in the privatisation. "For us, this [cancelling the Imuna tender results] is a standard example of non-transparent privatisation, where the winner was harmed by a decision that was never reasonably explained to him," said Ľubomír Solárik, the head of the supervisory board at Interaqua and the company's spokesman.
While economic analysts said they could not judge which side was right, they warned that closer attention should be paid to the many smaller privatisations the government has planned for this year to limit favoritism or clientelism in sales.
Imuna, the only Slovak processor of blood plasma, ran into financial trouble in the 1980s when the communist Czechoslovak government couldn't afford to invest into modernising Imuna's production, causing the firm to fall behind other players on its western export markets. The situation worsened in the 1990s when a planned investment of 44 million German marks into operations never materialised.
Imuna is now struggling to survive, having managed in the year 2000 to lose 90 million crowns on sales of only 140 million (a similar result has been achieved in each of the last four years). The state does not expect to make money selling the firm - Interaqua won Imuna with a bid of one Slovak crown - but has hung its last hope on finding a new owner who could bring it modern medical products technology.
According to Solárik, Interaqua's offer represented just such a hope for Imuna, as the firm's American investor - the medical firm PDC Partners International of Hartland, Wisconsin - had sufficiently deep pockets to take over Imuna's debt portfolio of 456 million crowns ($9.1 million) as well as guarantee investment of 1.04 billion crowns into new production lines at Imuna.
But the Privatisation Ministry, which was in charge of the tender selection process, arrived at a different opinion. According to Privatisation Minister Mária Machová, Interaqua's offer had at first seemed interesting, but then had given rise to doubts over the company's ability to absorb Imuna's debt portfolio and investment requirements. The economic ministers had also expressed reserve about the American partner, of whom they knew little.
"We had three bids, and we expected when we opened the envelopes that we would find offers from companies which are well known on the medical market. Unfortunately, none of those offers was what we expected," said Machová in an interview with The Slovak Spectator May 29.
"We eventually chose Interaqua because their business plan, with all the investments they promised, gave Imuna a chance at revival in the future. However, we later came to the conclusion that what Interaqua promised to do in its investment plan wasn't relevant to Imuna's needs. We may have made a mistake in that we didn't ask them to give us proof of their financial backing," Machová said.
Solárik, however, said that Interaqua's American partner was an experienced producer of electrical components in co-operation with such firms as Siemens and General Electric, and added that had the company been asked, it would have readily furnished proof of its financial strength.
For Interaqua, the reason behind the cancellation of the tender results lay in Imuna's past, rather than in an innocent 'mistake' by the Privatisation Ministry.
Solárik alleged that the Slovak government had guaranteed a seven million German mark loan for Imuna from Credit Lyonnaise, while Imuna in turn had handed out contracts to eastern Slovak companies, which according to Solárik had overcharged Imuna for the construction performed.
"We believe there are some people in the Prešov region [where Imuna is located], who are afraid that the due diligence process we wanted to undertake in Imuna would shed light on some of the contracts that were signed," Solárik said. "We also took on this [Credit Lyonnaise] loan on the condition that we would share the decision on how it would be repaid, and to whom, something they didn't allow us to do. It's suspicious."
Machová, for her part, rejected "any allegations of pressure from Prešov region which might have forced the economic ministers to cancel the tender results."
For economic analysts, the Imuna privatisation, as well as other sales of smaller state companies such as ship and harbour utility SPaP (see story this page), salt mill Solivary Prešov, and chemicals maker Novácke chemické závody, call for more attention to be paid to tenders that fall below the radar of massive deals such as those upcoming for state bank VÚB, gas utility SPP and electricity utility SE.
According to Marek Jakoby, an analyst with the Mesa 10 think tank, all eyes have been focused on the SPP and VÚB privatisations set for this year, leaving room for less transparent practices on smaller deals. "This [focus on big deals] might generate an effort [by the state] to make biased decisions and choose the winners quickly," Jakoby said.
"These firms may be smaller than the state monopolies, but they are of considerable importance for the regions where they are located because they are often one of the few sources of employment. The government should really be careful about which investor it selects for these firms," Jakoby added.
For Interaqua, recent events suggest it might be better off building its own facility rather than throwing its hat in the ring a second time. Another privatisation tender has been called for Imuna, and should be closed by the end of June.
"I'm not even sure whether Imuna can survive until the investor is chosen. We let our American partner know of the conditions for the second tender, but I expect that this time he will force us to withdraw, and will prefer to build our own plant, something we wanted to do before we bid for Imuna," Solárik said.