Uncertainty surrounds arivia sale

By Martin Czernowalow for arivia.kom
Johannesburg, 12 Oct 2007

Confusion surrounds arivia.kom`s privatisation, as rumours surfaced this week that at least two of the five short-listed bidders have pulled out, or are rethinking their involvement, on the back of more information about the company`s woes.

Earlier this year, Accenture, Business Connexion, Dimension Data, Siemens Business and T-Systems were chosen as preferred bidders for the parastatal IT services outsourcer, which is owned by transport and electricity utilities Transnet (41.5%) and Eskom (58.5%).

This morning, various sources close to the process claimed that Accenture and Siemens Business have or are planning to officially withdraw their bids.

Siemens Business could not comment on the issue at the time of publication, while an Accenture spokesperson denied the speculation.

"I`d like to confirm that Accenture has also heard the rumours in the market and, as far as we are concerned, Accenture is still in the process," she says.

However, the company did not comment on whether it plans to continue pursuing the acquisition. This is despite a well-placed source saying Accenture has given written notice of its withdrawal.

Government`s refusal to talk about the sale has not helped to clarify the situation.

Since the announcement of its intention to sell arivia, government has clamped down on communication regarding the process. It has consistently refused to comment, similarly gagging the potential buyers from speaking about the deal.

In the dark

Well-placed sources have, for some time, stated that bidders have also been kept in the dark about the parastatal`s financial and operational health.

It is understood that, only in recent weeks, have the bidders been allowed to conduct due diligence studies on arivia. This has allegedly prompted some of the bidders to rethink their interest in buying the company.

It is known that most of the bidders are purely interested in two five-year contracts, worth around R400 million and R200 million a year for Eskom and Transnet, respectively, which will form part of the deal.

It was initially said the latter contract was possibly to be boosted by the inclusion of services for the National Ports Authority, which would have added a further R300 million a year. But this has subsequently been withdrawn.

Sources claim that, whereas the bidders are keen to get their hands on the outsourcing contracts, arivia itself is likely to become problematic, as the company is rumoured to be "virtually worthless". It is understood that government has put in place strict conditions, which will prevent a buyer from stripping the company and selling off its assets.

"It`s, therefore, understandable that some of the multinationals would be reconsidering their positions, as they would have one hell of a time explaining taking on this kind of risk to their foreign shareholders," says a source.

Transnet and Eskom have earlier said they would not comment on the sale while it is in progress.

Final bid submissions have to be made by 26 October, and a final shortlist of bidders will be completed by 19 December. Government`s due diligence study on arivia will be concluded by the end of February.