June
2008
REPORT
 
Vol. 4 No.5  
 

State pharma sale fears
property asset strippers

Generic medicine producer Antibiotice Iasi is one of the few
profi table state fi rms for sale, but the privatisation has failed in fears over murky real estate dealings, reports Ana-Maria Nitoi
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State pharma company Antibiotice Iasi failed to privatise last March because the factory’s union felt the contract did not offer sufficient security for the workers’ jobs.
But this was further complicated by the fact that none of the bidders were wellknown international pharma companies.
The Moldavia-based company also fears that a purchaser may be more interested in the pharma group’s 40 square kilometres of land for hot real estate deals, rather than a state factory churning out paracetamols.
Antibiotice Iasi is one of the few profitable state-owned companies in Romania. The company is also the only pharma producer of generic medicine in central and eastern Europe which continues to be state-owned, with the Privatisation Authority (AVAS) owning the majority share package of 53 per cent. In 2007, Antobiotice Iasi posted a 62.8 million Euro turnover and a ten million Euro profit.
The factory was supposed to be sold in a public auction last March. But the
employees of Antibiotice Iasi were unsatisfied because AVAS did not assure the workers that after the buy-out, they would remain with jobs. Antibiotice union head Vasile Stanga explains to The Diplomat that AVAS agreed to the workers’ demand, but did not put this on paper.
Stanga says AVAS could have agreed to a social contract between the employees and the new owner with AVAS as mediator, a process used in other EU member states. But this was not an option.
The privatisation method chosen by AVAS also did not ensure that the factory’s business of generic medicine production would continue after the buy-out.
But AVAS president Teodor Atanasiu fights back. “Our intention is to transparently privatise the company and to ensure equal treatment between the potential bidders, respecting EU legislation in this matter,” he told The Diplomat.
Nevertheless the Antibiotice union took AVAS to court. It won and the privatisation was postponed.
Before the tender, suspicions were raised in Iasi because the authorities decided not to issue a task book, which contains a number of conditions any company interested in a public acquisition has to fulfill to take part in the auction.
Such a move made it possible for companies with no apparent background
in pharma and registered in tax havens such as the Cayman Islands or Cyprus to show interest in the privatisation.
AVAS says that the method chosen for Antibiotice Iasi was meant to prompt a fast, transparent, competitive and efficient sale.
“The auction minimises potential investigations by the European Commission
and maximises the price of the shares owned by AVAS,” Atanasiu says.
Another worrying aspect of this privatisation is that there are some real estate
interests in the purchase of the pharma factory. Iasi is the largest city in Moldavia with a huge cultural history and an EU gateway to the Republic of Moldova and the ex-Soviet space. The company is located on 40 square kilometres, ten km from the centre of Iasi.
A company could be created especially to buy Antibiotice for the land, run the
pharma business into the ground slowly, while selling off the land or developing it for profitable shopping malls, car part factories or logistic centres.
“It smells like a real estate business to me,” says the CEO of A&D Pharma Dragos Dinu. “Because a pharma producer who has an agreement with a real estate developer could acquire Antibiotice and sell the land afterwards to a developer.”
The minority stake of 47 per cent in Antibiotice Iasi is already listed on the
stock market and Dinu says the easiest way to privatise the pharma producer
would be to list the remaining shares.
But Atanasiu says choosing to list the company’s shares to privatise Antibiotice
Iasi would bring a smaller price because a bidder negotiating for a majority stake would be willing to pay more.
AVAS could not say when it would restart the privatisation and which method
it would choose to sell the pharma producer.
“We will relaunch the privatisation when we will have proper conditions on
the market,” Atanasiu says.
Union boss Vasile Stanga says that AVAS is considering restarting the privatisation this summer. But he believes that the best choice would be to postpone the process until next year when the elections are over.


 
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