Dispute emerges: HEC buyer gets legal notice for ‘illegal’ use of trademark

Cargill Pakistan considers action against Cargill Holdings to protect brand name.


Shahbaz Rana April 18, 2015
Out of nine members who attended the PC board meeting, three opposed the Rs250-million offer and recommended that the process of HEC privatisation should be re-initiated and the government should go for fresh bidding. PHOTO: FILE

ISLAMABAD:


Cargill Pakistan Holdings Limited has served legal notice on Cargill Holdings Limited, the buyer of Heavy Electrical Complex (HEC), for what it says illegally using its ‘Cargill’ trademark in HEC acquisition, putting a question mark over the due diligence carried out for the first strategic sale.


Cargill Pakistan Holdings took the step at a time when fresh details of HEC privatisation revealed that three members of the Privatisation Commission (PC) board had opposed the company’s sale at a low price of Rs250 million in cash, show official documents.

On March 24, the PC board met under the chairmanship of Mohammad Zubair, the PC Chairman, and approved the bid of Cargill Holdings, which offered to absorb all existing bank liabilities of HEC, keep all employees of the company and pay Rs250 million in cash to the PC. Subsequently, the Cabinet Committee on Privatisation endorsed the PC board’s decision.

Out of nine members who attended the board meeting, three opposed the Rs250-million offer and recommended that the process of privatisation should be re-initiated and the government should go for fresh bidding, showed the documents.

Of the remaining six members, who voted in favour of the deal, two were official members – the PC chairman and Privatisation Secretary Ahmad Nawaz Sukhera.

Under the Privatisation Ordinance of 2000, the PC board can take a majority decision.

The private members who attended the meeting were Nasiruddin Ahmed, Aziz Nishtar, Khurram Schehzad, Zafar Iqbal, Zafar Iqbal Sohani and Shahid Shafiq. Minutes of the meeting did not mention the names of those members who opposed the deal, raising transparency concerns.

“The PC should separately mention the names of those members who come up with dissenting notes,” suggested a PC member, but requested anonymity. He pointed out that three members were not in favour of selling the company for just Rs250 million, particularly when it was spread over an area of 61 acres. Under the assets-based approach, Deloitte Pakistan, the financial advisers, had valued the company in the range of Rs1.2 billion to Rs1.5 billion. Based on the discounted cash-flow approach, the financial advisers put the value at Rs564.2 million.

Questions have also been raised over the buyer of HEC, the Kenya-based Cargill Holdings Limited, which has received legal notice from Cargill Pakistan Holdings. Cargill Pakistan, a subsidiary of US-based Cargill, claimed that “Cargill is the registered proprietor of the trademark, Cargill, worldwide and in Pakistan, having tremendous goodwill and reputation.”

This has raised doubts over due diligence conducted by the PC before declaring Cargill Holdings eligible for bidding. Cargill Pakistan added a third party was making “illegal use of its trademark”. Cargill also disassociated itself from Cargill Holdings that acquired HEC, which manufactures electric transformers.

US-based Cargill is 150 years old and is the largest privately owned company in the US, and “we will take necessary action to protect its brand name”, said a Pakistan-based official of the company. “A stop-and-resist notice has already been served on the buyer of HEC,” he said.

According to documents that Cargill Holdings submitted to the PC, the company was registered in Kenya on December 10, 2014 just a day after the PC decided to re-advertise for HEC privatisation.

Syed Sabur Rehman, who oversaw the acquisition process, was born in Lahore and was a British national, according to the company documents.

Officials of Cargill Holdings were not available to immediately respond to the queries.

“The Privatisation Commission was aware that the approved bidder for HEC was not the US-based Cargill,” said a senior PC official. The matter had been referred to the legal team for consideration, he said.

The PC was of the view that the trademark dispute would not have any adverse implications for the HEC deal.

Published in The Express Tribune, April 19th, 2015.

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COMMENTS (3)

Omar Malik | 6 years ago | Reply @Daniyal: HEC is a loss making company because it is run by ministry official and its always the case that bureaucrats are not trained professional nor they have interest in affairs of the company. All SOEs have the same story including Pakistan Steel and PIA etc. Had HEC been in private sector it would have been a profit generating unit. Secondly, PC can get a better price if they decide to rebid than negotiate with a single bidder who is now facing legal notice for using an established trademark name.
Abdulaleem | 6 years ago | Reply The sooner we sell loss making companies, the better it is for us. If we re initiate the process, it may cost us (in terms of losses) more that the value we may or may not get
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