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Caroni's Distillery sold to Angostura

Independent - March 09, 2001
By Raffique Shah

GOVERNMENT is proceeding with the sale of 49 per cent of Rum Distillers Limited (formerly Caroni's Rum Division) to Angostura for $35 million in spite of protests by several unions that have offered to buy the same stake in the company for a sum that's higher than the Angostura bid. This was made clear by Mr Jerry Hospedales, head of the Government's Divestment Secretariat, the body charged with privatising several state-owned companies. The unions were prepared to top Angostura's bid with a $40 million-plus offer, but Hospedales rejected the offer, saying that "negotiations with Angostura were in an advanced stage".

Hospedales wrote to the unions last week informing them of this latest development, and invited them to a meeting last Tuesday to brief them on government's plans for Caroni's other divisions-rice, citrus, livestock and sugar operations. But union leaders were incensed that government did not give Caroni workers or its other stakeholders the option to buy into the distillery, and they said (prior to Tuesday's meeting) they intended to raise strong objections to the stance taken by government and the Secretariat.

Speaking for TICFA, the main organisation representing cane farmers, chairman Raffique Shah said he was "fed up with the inequal treatment meted out to sugar workers and cane farmers". "When TSTT and NFM went on sale recently through the NEL mechanism, TSTT employees were given preferential treatment. They were granted interest-free loans of up to $20,000 each to buy shares in NEL. I imagine NFM employees also enjoyed preferential treatment. But here we have a fait accompli, with government selling out 49 per cent of the distillery, and not only have they not offered Caroni's employees and its farmers similar conditions, but they have spurned a better offer from the unions. This is injustice of the highest order."

Shah was among union leaders who led a battle over the real value of Caroni's aged rum stocks. A consultant hired by Caroni's board in early 2000, Thomas Fuchs, put the value of the distillery as an ongoing operation at $935 million. Caroni's own balance sheet as at June 30, 2000, showed where Rum Distillers could make at least $500 million in profits over the next 10 years, provided certain changes were made in blending and marketing its rums. However, following the row that erupted, the Secretariat engaged the services of the Main Rum Company (MRC) of the USA to value the stocks and they came up with a figure of $20 million.

"What was not said," Jai Ramkissoon, president of SISA, one of the unions, told the Independent, "was that the MRC purchases bulk rums from Caroni, so it was in MRC's interest to under-value the stocks. What no one has explained so far is why there were such great disparities in the valuations done, all of them supposedly by experts." Ramkissoon explained, "Something must be wrong when someone with the reputation of Thomas Fuchs says that the stocks and operations are valued at $935 million, and the MRC says it's a mere $20 million. Since Fuchs was retained by the board less than a year ago, was he over-inflating the value of the distillery, and for what reasons? Or did the MRC under-value the stocks? No one is giving us answers. They are only dictating to us, not consulting with us."

Washington Demas, president of ATASS, the association that represents senior staff at Caroni, said the way government was going about privatising Caroni without proper consultations with the interest groups was obscene. "Hospedales summons us to meetings only to make announcements and dictate to us. The meetings are pointless, so much so that documents are not sent to certain units on time. And based on what he said in his latest communication to us, the rum deal with Angostura is a done deal." Demas said Hospedales and his Secretariat accused the unions of not submitting bids for the various business units (rum, rice, citrus, etc.) when they were first invited.

"We had no idea at the time that government was going to part with the distillery for a petty $35 million," he said. "If we did, then we will have put in a bid. We had expected Angostura or whoever was interested in becoming a partner with Caroni to pump at least $100 million in the distillery." When the unions learned that the local rum manufacturers, whose board is chaired by Lawrence Duprey, was declared the "preferred bidder" for a mere $35 million-and a request for an additional 30 acres of land-they decided to intervene.

"That led to another farcical valuation of the rum stocks by the Main Rum Company," said Shah. "Suddenly, its value dropped to $20 million. I'm surprised they did not put it at under $10 million to suit their nefarious ends. The bottom line is they want Angostura to have the distillery. Today it's 49 per cent. By tomorrow it will be 100 per cent. And all that claptrap about retaining the services of employees for three years will be thrown out of the window in short time. What has happened is that Prime Minister Basdeo Panday, who earned his political reputation on the backs of sugar workers, is now ditching them with contempt. Even TSTT and NFM workers, who are considered PNM supporters, are getting a better deal than Caroni's workers and farmers."

Shah said the unions had already spoken with several international rum dealers who were prepared to join with them (the unions) in ploughing capital into the distillery. "Their offer must be considered superior to Angostura's, not only because they are putting out more money, but more so because they will give us toeholds in the US and European markets, where it is difficult to break into because of the tariffs structure and other barriers. They are firms registered and based in the US and Europe, so it's easy for them to sell rums on those markets."

Demas said that Caroni's board did not even look at a business plan for the distillery drawn up by Caroni's executive managers. "They said that was not important because government had already decided to divest the distillery. Since that is potentially the most profitable side of Caroni's operations, then its sale to Angostura signals the death of the entire sugar industry." Sugar operations, he added, will not make a decent profit even if it is restructured. And citrus, livestock and rice are "small fish" in the overall scheme of things.

The Government appointed the Hospedales committee back in April 1999 with a mandate to prepare Caroni (among a few state enterprises) for divestment. Subsequently, a Project Management Team (PMT) was formed to work out details of the divestment procedures. Records show that the distillery made a profit of $4.5 million in 1997, but it suffered a loss of $7 million in 1998, mainly due the loss of sales of bulk rums to Colombia, which was experiencing some economic turmoil.

However, projected performance (based on certain changes and some cash injection) showed profits of $4.6 million in 2000, $6.7 million in 2001, $9.9 million in 2002, $13.1 million in 2003 and $16.2 million in 2004. It employs 115 persons and owns plant and machinery valued at $20 million. Only the value of its 3.5 million litres of aged rums remains unresolved.


Copyright © Raffique Shah