International companies are not prepared to participate in privatization of “UMCC” without the Government’s guarantees to protect intensive investment
14 December 2021
International companies are not prepared to participate in the privatization auction of JSC United Mining and Chemical Company due to the lack of guarantees to protect intensive investment by the Cabinet of Ministers of Ukraine, despite the interest in acquiring the facility. These guarantees have not been approved as of December 14, when there are 3 business days left before the auction.
BDO Corporate Finance, as an advisor on UMCC privatization, on the basis of requests from investors on the need to provide guarantees to protect investment, addressed to the Government in October 2021.
A draft order of the CMU on granting authority to the SPFU (State Property Fund of Ukraine) to provide guarantees in the Purchase and Sale Agreement on ownership rights of production assets and covering risks of UMCC historical business activities, and Memorandum of Understanding draft on protection of intensive investment, which should be concluded between the winner of the auction and the Government, has been drafted and sent for approval together with the State Property Fund of Ukraine.
The conclusion of these documents should ensure maximum involvement of international investors in the auction and the successful privatization of “UMCC”. BDO Corporate Finance has also informed about the need to conclude documents and expectations of international investors at the beginning of December, on the eve of applications deadline for participation in the privatization auction.
The EBRD (European Bank for Reconstruction and Development) has confirmed its readiness to provide financing for reputable investors for the development of UMCC after the auction. BDO Corporate Finance organized the EBRD's communication with five reputable investors, involved in UMCC auction preparation, and several managed to complete all relevant Due Diligences.
“International investors positively evaluated the results of “UMCC” preparations for privatization and the company's attractiveness. At the same time, certain risks of doing business in Ukraine, and the complicated history of the facility remain a constraining factor to intensive investment. Prior to the start of “UMCC” projects, international investors are seeking guarantees from the Government on historical risks, business protection and the prevention of unlawful pressure in the future.
The participation of international companies in large-scale privatization will be possible when investors are confident in the security of their business in Ukraine”, — said Vitaliy Strukov, Managing Partner of BDO Corporate Finance.
In fact, during the preparations for privatization, the operating performance was improved and the stocks of “UMCC” production plants were expanded. In particular, due to the establishment of effective corporate governance and the eradication of corruption at “UMCC”, the company's profit for 10 months of this year is UAH 600 million — 6 times more than the profit for 2019. In addition, special permits and licenses were extended and new ones were obtained.
BDO Corporate Finance, that specializes in M&A, fundraising and strategic consulting, together with BDO in Ukraine is part of BDO International network. In 2020, BDO International made and participated in more than 1,500 M&A transactions worth nearly $ 83.5 billion and became No. 1 M&A advisor in the world according to the PitchBook rating.
BDO in Ukraine is the leading audit and consulting group, the member of the world's 5th international association of independent audit and consulting companies. The company provides a wide range of services in auditing, business restructuring, business and IT consulting, cybersecurity, business process automation, tax and legal practice, accounting outsourcing, valuation, sustainable development and more. About 200 employees work in the company's offices, located in Kyiv and Dnipro.
BDO International has more than 1,650 offices in 167 countries with total sales of $ 11.8 billion in 2021.