Bids for Sun Air fall way below the mark
AT LEAST one of the two bids made to the government for Sun Air was for well under R30-million, according to sources close to proceedings.
Only two binding bids were made in what is considered a minor but important privatisation step. They were made by a Rethabile/Comair consortium and Phoenix Venture Partners.
Public Enterprises Minister Stella Sigcau and Transport Minister Mac Maharaj said this week discussions were still in progress with the two parties.
Two earlier bidders withdrew: Bhekilanga when its partner Virgin Airlines pulled out, and Malaysia Air on talk that it intended to pursue the airports themselves when they were privatised.
The government appointed two investment houses, Board of Executors and HSBC, as advisers with regard to privatisation. Neither has permission to disclose valuations placed on Sun Air, or the value of the bids, but speculation suggests the two are far apart.
Public Affairs' public relations officer Wandile Zote says the government listens to its advisers and adds that bidders will obviously try to get the price down. "We are not desperate to sell Sun Air. We should be able to arrive at a decision within a few weeks."
The government is believed to be reluctant to sell Sun Air for less than the valuation ascribed by the advisers. Estimates range from R50-million to R100-million, with R65-million most mentioned. If government does not sell, its commitment to privatisation will be called into question. In the final analysis, the true value of assets is the price a buyer is prepared to pay.
While Sun Air is not one of the trophies in the cabinet, the government's refusal to sell would be a negative message to potential investors for the bigger prizes, including SA Airways.
The preparation of bids involves significant time and expense, and the spoils of privatisation are the primary reason why so many multinational finance houses have opened offices in South Africa.