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Since day one of QR's acquisition of 35% of Cargolux, I was scratching my head. The numbers made no sense, the official declarations looked suspicious, and hard information from my old friends let almost no doubt: We weren't told the Truth, and actually misled by the powers to be. But now, look here, we have the missing link, that vindicates one year of skepticism. Véronique Poujol, an investigative reporter with Lëtzebuerger Land unearthed the trick used to make some people go away quietly, and that was played and buried deep in the banking secrecy of an intermediary bank, ING. The article in French "Traitement asymétrique" appeared yesterday in the Land.
Remember that one of the basic questions was, why would Cargolux sell shares to QR, the lowest bidder, if a Chinese bidder was offering 50% more? Several fishy explanations were offered: there was no other bidder (false), there were exclusive negotiations with QR (how intelligent!), there were excellent synergies with QR and CV needed that strategic partner, if not capital.
The deal in place however brought no new capital. It merely was designed to replace shareholders by someone else. Most prominent was BIP, a private investor. Why in the world would such a private fund neglect its fiduciary duty to please the wishes of government, and give up 50% of its potential sale? They didn't.
Véronique Poujol digged up the answer. BIP and other private shareholders kept quiet, as they got their due. Says the article, freely translated: "The acquisition of Cargolux shares by Qatar Airways on June 9, 2011, was set up through a secret transaction, covered by ING, in order to hide a preferential treatment in favor of the private investors."
Basically, ING took over the shares consisting of common and preferred shares as an intermediary and transferred them to QR, all converted in common shares. ING distributed the $117,5 million among the former shareholders on an agreed upon, but uneven key, advantaging the private investors. BIP getting away with $42,354 million, whereas Luxair's share in the sale, according to the same key should have been $101 million, but was only rewarded $27,75 million.
This according to the article raises new questions about the reason why such a secret strategy was used, and why the government owned entities were those treated with neglect if not abuse, and without protest from their representatives? The tax payers entrusted them with a fiduciary duty to be good stewards of the common good. Which rules if not laws, including European restrictions on this operation might have been violated?
The overarching question remains: why did the Luxembourg government push the least attractive proposal for the sale of 35% of Cargolux? Why did it conceal the inner workings of the deal through the use of a third party? Why did it disadvantage its own holdings (SNCI, BCEE, Luxair) and privilege the private shareholders? There are actually no more simple answers, excuses, non disclosure agreements, evasion and hiding. It is getting complicated. But we have the missing link.
As you seem to be an expert on this matter, I quote you in my post
ReplyDeletehttp://fisec.wordpress.com/2012/10/26/bip-gourmand/
hope you don't mind !
Please do.
ReplyDeleteLooked up your very interesting blog. We need more of those.
Thank you Mr. Thein for your view and comments.
ReplyDeleteThis is a time of testing for both Cargolux, its shareholders, and for the state of Luxembourg. Some of their own practices, is what Cargolux now face from the "mess" that has hit them. As all farmers know: "As you sow, so you will reap."
There is a solution to the problems Cargolux is into, but they can not continue with operating in the darkness. They will need to bring things into the light. There need to be a deep-rooted change in the culture of Cargolux, unless they want to taste more of their own "medicine".
Private shareholders had "skin in the game." They cared at least for their money, as we have seen. Now that they left, the only motivated shareholder is ..... QR!
DeleteAll others represent the government and their own commissions.
The word is "purge"...
ReplyDeleteThe answer is YES. Will it happen? NO.
DeleteThis is a very strange story indeed. What could have been the motivation for Frieden to stick with the Qatari's? Also Wildgen was involved with this deal (interesting!)
ReplyDeleteI wonder how many "camels" they got for this deal!
But in the end they will succeed in wiping it under the (flying) carpet, as usually in Luxembourg.
You invented a new word: the "camelization" of CV
Deletewell well, as a former employee of Cargolux i can just confirm that many fondamental errors have been done and not corrected by the already infiltered german management, in place for the past last years. What Cargolux needs is a strong financial shareholder, but definately not another airline. Lufthansa did not work, Swissair, did not work, why should QatarAirways work? Also lets not forget that the company itself did not get any advantages from Qatar stepping in. lots of people forget that in this case the ones who sold their share got the money from the Qataris, but the company itself didnt see any dime. so now we need new Capital injection? how strange.Management wise the company was never but never so weak as it is today. the executive commitee was never running the company and the shareholders couldnt care less as they didnt have a clue about the cargo business,this company was in the past always commercially driven by the middle managment. the essential reason for that was that Cargolux never had a home market,strange enough Qatar also doesnt have a home market from a cargo point of view!! Have a look at their present management, what do you want these guys to do? trace back their CV's and you will be surprised.
ReplyDeleteI have probably been longer ago than Anonymous a Mgt Employee of Cargolux, but absolutely everything he says is so true.
DeleteA real shame for this company that I continue to observe with nostalgia!
A significative anecdote: As a head-hunter I once approached one of Cargolux directors to discuss a most interesting career step outside CV with him.
He said: this was the only employer in my life; I've lived and seen everything here, even down do very close to complete closure! Now I'll stay on and watch it go down!
I hope he won't be right! And I hope he's taken notes to write a book!!!
Ah well, Pol as you might remember in the 80s crisis, I told you when they 'got' me, that your turn would come once they'd shown all the non-yes men the door. And YES I'm still bitter!
Deletethings aren't going to change, sadly, the Luxembourg government was never interested in aviation, it was just a 'sideline'for them, and I guess nothing's changed, sadly. I was with cargolux from it's foundation (while in Iceland) and was one of the Loftleidir slaves in the 1974 merger. It is so sad to see the airline in such a situation.
A sad story, Pol. I know some too.
Deletecargolux is changing, our chief pilot just stepped down and more will follow.the old cargolux is vanishing into modern,more controlled times. i worked for many other airlines but i have never seen so much corruption, dealing and money hunger anywhere else. no social aspects just shut up and do as your told.
ReplyDeleteand this is happening in the heart of europe. I also hear our former german CEO who went to jail, got a new management job with Qatar. SO who is the fool?
In the end the employees who trust their lives and families to these people.
i am very dissapointed in the management who went into chaos with open eyes.
I am even more dissapointed in luxemgurgish government who seem to have no idea what tsunami has hit them yet. we need even stronger unions,strikes and more than ever have to stand together ( which seems the hardest part for he greedy ones just wanted to fill their pockets for many years).
Good luck.