NEWS | Wednesday, 09 January 2008

Lombard’s easy route to government property

By a special correspondent

The Government of Malta is issuing for sale no less than 11,200,000 shares of €0.25 at double the price to earn €5.6 million (Lm2.4 million) from the sale of its 40% stake in Maltapost plc.
The latter is Malta’s leading postal service company that has a monopoly on reserved postal services up to 2013 and an exclusive authorisation to be the Universal Service Provider.
The sale of this shareholding is and expected to be offered to the general public in mid-January and eventually, Maltapost plc becomes a listed company on the Malta Stock Exchange by end of this month. The sale of Government’s minority shareholding in Maltapost plc to the general public was announced late last year and is part of the strategic plan to fully liberalise the postal services industry.
The privatisation of Maltapost plc has been a colourful event much more than the red post boxes that adorn our streets. Way back in 2002, the Government of Malta had transferred 35% shareholding to Transend Worldwide Ltd. This New Zealand based company was also given a Management Contract which was not renewed when it expired. Transend lost interest in managing Maltapost and only retained their shareholding until August 2006 when it sold it to Lombard Bank (Malta) plc. The latter, is also listed in the Malta Stock Exchange and at first this move was not understood by the general public. However, Lombard’s strategy was only crystalised in September 2007 when through a fully owned subsidiary it acquired a further 25% of Maltapost from Government.
At this point, the Government became a minority partner in Maltapost which eventually will cease to hold any holding in the postal operator through the forthcoming sale of shares of the general public. The smartest party was Lombard, as in a two-step move it became the majority shareholder of Maltapost. But this was not the only benefit to Lombard. Through its ownership, Lombard became the manager of 43 properties used by Maltapost to conduct its activities. From the due diligence exercise carried out and about to be revealed in the offering prospectus no less than 21 properties are held by Maltapost under a title of lease. What is interesting is the statement that for the 22 other properties no written contract was ever entered into between the Government and Maltapost. Worse still to the exchequer and to its coffers, no less than seven properties were occupied by Maltapost without any rent being levied, much less paid.
Lombard, since September last year, has been the majority holder of Maltapost and the main beneficiary of the 22 properties which were used by the postal operator without any apparent title. This stronghold on Government properties was obtained when Lombard bought ‘only’ 25% from Government, thus taking majority control in Maltapost. In the share purchase agreement between the Bank and Government, the Exchequer warranted that it will continue to recognise Maltapost with the available title over all the premises occupied by it and under the applicable terms and conditions.
In one fell swoop Lombard, the third largest local bank, obtained a ready made branch network without much hassle and at a relatively non commercial transaction. It is not known if the Government will subject this grant of use of its property to the private sector before parliament or the Public Accounts Committee.
Meanwhile, private investors buying up the shares from the forthcoming share offer do not have anything to worry about their potential investment in Maltapost and its unorthodox occupancy of property. Nobody lifted a finger in the last six months. Why should anyone do it on the eve of an election?
Concurrently a substantial shareholding of 43% in Lombard Bank is in the process of being acquired by the second largest bank of Cyprus called Marfin Popular Bank plc.