CORPORATE BRIEFS

FNM cancels 1995 sale of Kováčová and Sliač Spas, retakes shares

On July 13, 51% of shares in the health spas Kúpele Kováčová a Sliac a.s. were transferred from the account of Sliač-based Corvas company to the account of the FNM state privatisation agency. The move increased the FNM holding from 16 to 67%, while Corvas's stake dropped to zero.

By this move the FNM withdrew from a privatisation agreement regarding the spas signed in 1995 with Viliam Sobona, Corvas' General Director and former Minister of Health in Vladimír Mečiar's government. Sobona told the SITA news agency that he considered the FNM's action to be "political revenge." He denied that his company had overdue obligations related to the purchase, and said he would take the case to court.

The FNM argued it had the right to withdraw from the contract because controversial amendments to the original contract had significantly softened the terms of the sale.

Corvas obtained a 51% stake in the spas in 1995 for 151.6 million crowns ($3.4 million), including investments. The first installment of 30.3 million crowns was paid from a loan. Corvas should have paid a 45.5 million crown portion of the purchase price in four annual installments of 11.4 million crowns, of which the first should have been paid by the end of 2000.

Approximately one half of the purchase price was to have been paid in capital investments into the spas. The first investment was to have been a 37.9 million crown injection by the end of 1996, while a second similart investment was to have occured by the end of 1997. However, Corvas managed to postpone the deadlines for payment of both installments as well as investments. The FNM does not recognise these amendments to the contract, and says that Corvas failed to meet many other terms of the sale, for example the creation of 240 new jobs.

The two spas netted 14.9 million crowns on sales of 203.2 million crowns in 1998. One year earlier, the spas reported a net profit of 2.3 million crowns on sales totaling 185.2 million crowns.

The FNM has recently withdrawn from several privatization contracts sihęgned during the Mečiar era, and has regained stakes in steelmaker VSŽ, Piešťany Spa, press distributor PNS and others.

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