Tycoons On Course To Buy Historic Polish Shipyard

GDANSK, Poland -- Facing bankruptcy, the historic Gdansk shipyard, the birthplace of Poland’s Solidarity movement, has a buyer in one of Ukraine’s largest business groups – the Industrial Union of Donbas – but new complications are tying up the sale.

Gdansk shipyard, the birthplace of Poland’s Solidarity movement.
The Ukrainian group, co-owned by billionaires Serhiy Taruta and Vitaliy Hayduk, hopes to bail out the state enterprise, which has seen 90 percent cuts in jobs in the last 18 years and faces restructuring orders from EU Competition authorities in Brussels.

EU competition authorities claim the shipyard illegally received over $1.8 million in state subsidies since Poland joined the EU in 2004, and subsequently asked management of the shipyard to shut down two of its three slipways to ensure fair competition with other European shipyards.

These developments have raised fears with Gdansk shipyard workers that Poland’s newly elected liberal Civic Platform government would delay the sale of the shipyard to the Ukrainian conglomerate to investigate whether it was carried out fairly along with other former government dealings it considers non-transparent.

Close to 200 Gdansk shipyard workers voiced their fears Oct. 29 that the pro-business Civic Platform government would reconsider the shipyard’s takeover.

Back in September 2007, EU Internal Market Commissioner Charlie McCreevy said that the restructuring of the shipyard was necessary to limit the distortion of competition through state intervention.

Now, the Gdansk shipyard risks paying Brussels back the millions of dollars it received in state subsidies if it does not reach an agreement with the Brussels competition authority, which opened a probe into the matter in August 2007. A Competition Commission decision on the shipyard’s future is expected in the coming weeks.

“We are aware that there exists the possibility that Brussels will make a decision to return the subsidized funds, however, we take this into consideration in our plans for the shipyard and are ready to pay the money back if required [by Brussels],” said Industrial Union of Donbas (ISD) Vice President Oleksandr Pilipenko.

Although Civic Platform supports further economic reforms and privatization of state enterprises, the new government has yet to give a definite timeframe for the deal to go ahead.

“Privatization of the yard is necessary, and under no circumstances will it be jeopardized,” Civic Platform deputy Tadeusz Aziewicz was quoted as saying.

Former Polish President Lech Walesa and former trade union leader of Gdansk shipyard, who led the Solidarity movement that toppled the communist regime in 1989, voiced his opposition to the sale.

“It’s a crime to sell the historic shipyard to a foreign investor,” Walesa said on Oct. 22.

Economic Counselor at the Polish Embassy in Ukraine, Anna Skavronska-Luchynska, doesn’t see what all the fuss is about.

“The new [Polish] government is even more liberal than the previous ones. In fact, I think they will privatize it [the Gdansk shipyard] even quicker than what has been done by the previous government,” she said.

ISD’s Pilipenko agrees and remains confident his company will take control of the shipyard soon.

“I don’t see any cause for concern regarding the new government. We have been shareholders and still are. We patiently waited for the [Polish government] to find a buyer and we kept to all the transparent procedures determined at a general shareholders’ meeting,” he said.

The Ukrainian group currently holds a minority stake. ISD’s intended 83 percent share buyout worth $400 million could settle the matter on all sides, since it stated it would not cut jobs and plans to diversify and modernize the shipyard using shipbuilders to produce metal parts for bridges or windmills.

Alexander Martynenko, an analyst at the Kyiv offices of brokerage Troika, said the purchase makes economic sense for the Ukrainian industrial group, the country’s largest steel-producing company.

“The move to vertically integrate downstream along the metal supply chain will offer security to this [industrial] group from its raw materials [in Ukraine] to the finished goods [in Poland].”

The Ukrainian group is ready to use its other holding, the Huta Czestochowa steel mill, which it purchased in 2005 for $468 million – especially its assembly lines, which fills orders for the shipbuilding industry – to supply metal products to the shipyard.

“This is very good positioning by the Industrial Union of Donbas,” said Concorde Capital’s analyst, Eugeniy Cherviachenko.

“They could build ships to supply metals while simultaneously strengthening their supply chain.”

Founded in 1995, ISD controls steel mills in Ukraine, Poland and Hungary and holds an interest in a mill in the US.

Source: Kyiv Post