My Orchids. Phalaneopsis. "Hidden Agenda" Photo ET
Cargolux, a Postmortem
We know what happened
with the Qatar Airways - Cargolux deal. It just was a mindboggling adventure
that in no way was a "good deal", and was miserably negotiated. It
would barely have helped Cargolux, but rather to the contrary would have and
indeed has hurt Cargolux.
In the aftermath of
such an ordeal, any serious company on earth would have licked its wounds,
maybe would have apologized even for failing to responsibly lead the company,
and would of course have committed itself to take every step possible, so that
the same mistake will never be made again. Alas! The same mistake was made again and in a hurry. Almost no one would
have expected this to happen twice. I give up on quoting Einstein on insanity.
I would have expected a
thorough evaluation of the company after the QR debacle, very probably the
replacement of the CFO brought in by Qatar Airways, not as a sanction, but as
cautious good governance. He came from the other side. I would have examined
the reasons why and if indeed the Luxembourg government had to get rid of its Cargolux
shares, and establish the list of mistakes made in that flawed QR deal: the
valuation of the deal, the question of the minority shareholder's veto right,
the attractiveness of the various other possible partners.
It appears that none of
these has been seriously undertaken. The HNCA deal is justified by general
talking points by those who made it happen. There might be good prospects in
the particular HNCA deal. But then it would certainly be easy to articulate and
demonstrate these. That China is a big country and will offer many
possibilities is very general. That other candidates didn't line up, is
nonsense. When Mr. Bausch announced he would negotiate for further last minute
landing rights in China before traveling to Beijing, he got the Chinese
equivalent of Luxembourg's "dann misst een emol kucken". They have to
think about it. He travelled to sign the minimal agreement, which he could have
done in an environmentally friendly manner by scanning and Emailing, which as
we know has a lower carbon footprint.
More generally, the
deal has been pushed, though a very respectable law firm, Shearman & Sterling
was hired to give their best professional advice: they concluded that the
agreement needed a lot of work. Very often governments and companies hire an
outside consultant to say loudly, what the client didn't want to say himself.
Well, this wasn't the case with Shearman & Sterling. According to an ever
growing number of excerpts of leaked correspondence, the opposition to the deal
was vast at the management level.
Logically, in such a
case you hire another consultant. The very basic strategy is revealed by the
emerging details of a damning correspondence reported by Radio 100,7 and also
reported by tageblatt. The role of the "informateur" Mr. Schaus is questioned
there, for seeming to be of the second type of consultant: the clients
megaphone and green light barrier guard. Insiders talk about conflicts of
interest, as Mr. Schaus had been suggested as a CEO candidate early on, as he
started his role as consultant.
I had high hopes that
such an outside consultant would conclude to, and indicate a wider spectrum of
options for Cargolux, in the true Bain Capital approach, for which Mr. Schaus worked previously. Options that could
have been debated and weighed by management. I have seen a number of brilliant
analyses and advice brought together by Bain. This would also have satisfied
the neutral observers, which is of course not the case if the only outcome is
to confirm the for whatever reasons wishful agenda of the contracting party. In
particular this one statement is available on Radio 100,7. It is both a
superficial endorsement of the Chinese partnership, with a built-in preemptive
excuse for future failure, that is already squarely put on uncooperative management.
We succeed: it is the merit of the innovative thinkers. We fail: that's because
of the uncooperative Management.
Radio 100,7: "
…) There is a broad and remarkable consensus among the vast majority of players
(management, board, even trade unions and third parties) that the management
team in its current configuration and mode of operation is dysfunctional. This
is a serious issue that needs to be addressed as soon as possible and preferably
before any entering in relationship with a third party. Similarly, the equity
split between the different (Luxembourgish) actors and the composition and mode
of operation of the Supervisory Board need to be revisited and reengineered.
If the issues are not addresses successfully, the outlook
for the venture will be doubtful in any case. On the other hand, if these
issues are tackled, the partnership with HNCA sounds promising. Risks are
limited, but much more importantly, this may be the opportunity to give
Cargolux a new lease of life and to support it in securing a stable base in
Luxembourg based on sustainable global growth."
But wait: what
exactly is this to say: ".... the management team in its current
configuration and mode of operation is dysfunctional." Did managers want
to leave? Did someone want them to leave, as this language may suggest? In any
case, responsibility for future failure after their departure lies with those
who stay.
A clearer image
emerges thanks to the personal details coming out of the trenches. Exposing those
tactics on the ground, it is going to reveal the strategic Cargolux agenda in a
starker way.
For now one can
conclude that by signing the deal, the Luxembourg government has lost its
freedom of action, though it might hope that by getting rid of its shares means
that the ordeal is over. It is trapped, and there is no way out either of the
deal, or future problems.
The Chinese
party still has a backdoor open. Beijing has to approve the deal later this
year. It should, because HNCA got tremendous advantages, with only some shabby
USD of exposure. The Luxembourg side convinces itself that there is hope, that
everything they always wanted to ask for from HNCA, but never dared, will eventually come
together. But hope is not a strategy.
http://www.100komma7.lu/emissions/2014/01/29/cargolux-zitater-aus-de-breiwer-vun-ex-direktiounsmemberen-an-aus-dem-robert-schaus-rapport/
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