The government has cancelled its privatisation deal for Heavy Electrical Complex (HEC) after the Rs225-million cheque deposited by Cargill Holdings Limited was dishonoured.
The decision to cancel the transaction vindicates the stance of those who have been raising transparency concerns in the deal, raising doubts on the standing of Cargill Holdings Limited. It also deals a blow to the government’s multi-billion dollar privatisation programme, particularly at a time when it is set to embark on a plan to sell power distribution companies.
Privatisation Commission (PC) Chairman Mohammad Zubair confirmed to The Express Tribune that the HEC privatisation deal stood cancelled after the buyer did not deposit the remaining amount within the stipulated time.
The government has also kept the Rs25 million that the buyer had deposited as earnest money as a penalty.
Zubair said the commission was also considering lodging a First Information Report (FIR) against the company for giving a cheque that was dishonoured. “There were problems from the beginning but there must have been a reason for cancelling the deal,” the chairman said.
“The PC reserves the right to initiate any legal action against you and Cargill Holdings Limited….as consequence of the cheque, provided by you for and on behalf of Cargill, not being honored,” the commission wrote to Syed Sabur Rehman, the advisor of the company, while informing him about the cancellation of the deal.
Read: Privatisation Commission: Cargill Holdings offers Rs250m for HEC
On March 26, the Cabinet Committee on Privatisation had accepted Cargill Holdings Limited Company’s bid for acquisition of HEC at a meagre price of Rs250 million. It would have been the first strategic sale for the country in the last nine years.
It was a negotiated sale, as the board of Privatisation Commission had originally set the minimum price at Rs500 million. Deloitte Pakistan, the financial advisor for the transaction, had valued the company in the range of Rs1.248 billion and Rs1.475 billion.
The manner the Privatisation Commission handled the strategic sale invited a lot of criticism. The commission cleared Cargill Holdings Limited in the due diligence process despite the fact the company was registered just a day after the government re-initiated the HEC privatisation process.
Cargill Holdings Limited did not have financial strength to bid for the HEC acquisition. Yet, the commission not only cleared the company but also maneuvered the transaction in the board, said sources privy to the board discussion.
The termination of the deal proves that the Privatisation Commission handled the transaction in a dubious manner from the beginning, said Senator Saeed Ghani of Pakistan Peoples Party.
The PC also granted undue favour to the buyer by extending the payment deadline by almost a month. The Letter of Acceptance that the PC had extended to Cargill Holdings Limited had originally expired on May 21. However, the commission extended the deadline to June 19 while hoping that Cargill Holdings Limited will deposit the remaining amount of Rs225 million.
The PC documents showed that the commission extended the deadline in consultation with the board. However, the PC board members remained unaware of any such extension.
Read: Strategic sale: HEC privatisation hitting a roadblock
After getting the extension, instead of depositing the money, Cargill Holdings Limited took the government to Islamabad High Court on June 2 and sought a Status Quo Order. The court rejected the company’s plea on June 17.
The cheque that the company deposited was also returned to it by the commission, describing it a “wrongly drawn cheque”, according to the documents.
After the government cleared Cargill Holdings in due diligence, questions were raised over the real identity of the buyer. The company was registered in Kenya on December 10, 2014 with the name of Cargill Holdings Limited. Cargill Pakistan Holdings, a subsidiary of US-based Cargill, served a legal notice to Kenya-based Cargill Holdings for stealing its trademark, Cargill.
Published in The Express Tribune, June 24th, 2015.
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