Wednesday, October 3, 2012

FT: Romanian tycoon goes to ministry cash in hand, but fails to save privatisation bid

Turning up on the doorstep of the economy ministry with €3m in banknotes withdrawn from a personal account is certainly an impressive stunt, even by Romanian standards.

But for media mogul Dan Diaconescu, it wasn’t enough to save his somewhat outlandish bid for Oltchim, a debt-laden state-owned chemicals firm where operations were suspended in August and wages are in arrears.

It is perhaps not such a setback for Diaconescu, a youthful-looking and energetic journalist-turned tycoon-cum-politician, who now gets to keep his cash while having raised both his own profile and that of the Oltchim workers whose cause he claims to champion.

But for Romania’s privatisation programme, another can has been kicked down the road, while it seems likely that Oltchim will continue to weigh on an overburdened public purse.

Diaconescu had his €45m bid for Oltchim (which is €700m in debt) accepted on September 21, but days later prime minister Victor Ponta announced that the deal would fail as Diaconescu lacked the funds to pay.

Diaconescu – the owner of television station OTV – launched a scathing attack on Ponta in an interview with beyondbrics on Friday, accusing the PM of deliberately undermining his bid, and saying that “you will be very, very impressed with our next steps”.

These involved carrying out a promise to bring “cash in bags” to the economy ministry. The €3m in notes may have been from Diaconescu’s own accounts and are possibly enough to cover Oltchim workers’ wages for the rest of the year, as he claimed. But it fell rather short of his offer for the chemicals company, which was well above the other three bids and the company’s market value.

Diaconescu’s move for Oltchim, based in the central Romanian city of Ramnicu Valcea, has widely been dismissed as either extremely ill-planned, or a political stunt in the run-up to December’s general election, which Diaconescu’s new PPDD party will probably contest in opposition to Ponta.

“People are growing more desperate in Ramnicu Valcea, where Oltchim is the main economic entity,” says Andrei Chirileasa, capital markets editor of Ziarul Financiar, a Romanian business newspaper. Privatisation will almost inevitably mean job losses, but Chirileasa sees it as the only option for the company in the long run.

The IMF is encouraging Romania to divest itself of a number of state companies, including airline Tarom, rail freight company CFR Marfa and postal operator Posta Romania, a process that is unlikely to become easier after the Oltchim shambles. But the stellar success of privatised car maker Dacia, now owned by Renault, shows that the country can get it right – provided that the company in question has a real economic future.

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