Undeterred by his previous attempts, Mulugeta Tesfakiros, an emerging real estate mogul, appears still to be determined to acquire a state owned winery, regardless of the cost involved.
Yet again, he emerged last week, offering 458.4 million Br to buy Awash Winery S.C., surpassing the indicative price, by Privatisation & Public Enterprises Supervising Agency (PPESA), which was lower by 20 millionBr.
The Agency has not had much success in selling the winery, whose lush vineyard is located near to the town ofZeway, 163Km south of Addis Abeba. For the fifth round, Awash Winery was up for sale in November, 2012, along with five other state enterprises, including; Commercial Printing Press, Agricultural Mechanization Services Enterprise, and Hamaressa Edible Oil S.C.
Out of the six, offers had come for Bilito Siraro Agricultural Development, Arba Gugu farms and Awash Winery Share Company, when bids were opened, on December 20, 2012.
Mulugeta's offer for Awash was made through Blue Nile Investment PLC, a company he formed in partnership with London-based equity firm 8 Miles, chaired by Bob Geldof KBE. The latter, which takes its name from the shortest distance between Europe andAfrica, is known for its African Based investments.
Formed last month, Blue Nile is one of the many business endeavours that Mulugeta has been involved in since his 1997 return from a 12-year stay inBoston,US.
His other ventures include; co-ownership of Akakas Logistics, ownership of Muller Real Estate and Bekele Molla Hotel, in Langano, which he acquired for 80 million Birr .
He first set his sights on Awash, producer of eleven local brands, like; Axumite, Guder and Camille, when the winery was auctioned by the Agency, for a second time, in February 2012.
Together with, then partner, Tigist Deneke, he made an offer of 202 million Birr, which was rejected by the Agency. The offer was lower than the indicative price that the enterprise had set for the winery, which was 397.4 million Birr.
It was not just Mulugeta, however, who kept making offers below the indicative price.
The 69-year old, state owned winery, had repeatedly failed to bring about satisfactory offers from the private sector. This is despite having been offered for sale two times through negotiations, and four times through auction, by PPESA. In all of these auctions, offers that came in for the winery were invariably lower than the floor price set by the Agency.
The difficulty in privatising Awash, persuaded experts at the Agency to add 500ha of farmland to the winery when auctioning it. The farmland belongs to fruit and vegetable producer, Awash Agro industry, a different company to the winery, which supplies grapes to the winery.
Their move seems to have been successful in renewing interest, at least in Mulugeta.
"This time we matched the indicative price made by the Agency, because the addition of the farm made the investment attractive," Mulugeta says.
Partners, 8 Miles, are also convinced.
"We have had experts from different countries come to study the feasibility of investing in the winery, before coming up with the bid price," Doug Agble, part of the investment team from 8 Miles, told Fortune.
"We are also excited to invest inEthiopia, because Chairman Bob Geldof has strong ties to the country and wanted to foster private investment there."
Geldof, an Irish musician and singer, had previously been involved with organizing a concert to provide famine relief forEthiopia, in 1984. The company, 8 Miles, where he also serves as advisor, currently has funding from international financial institutions, like; the African Development Bank, International Financial Corporation (arm of the World Bank) and,UKbased, CDC.
The company first indicated interest in Awash at the African Sustainable Investment and Development Summit, organised by market advisory firm, Singularis Advisors and YHM consultants, based and registered inEthiopiaand theUK.
The same consultancy connected the company to Mulugeta, who then forged a partnership with them in order to offer the highest price at the bid opening ceremony. 8-Miles currently owns a third of the shares ofBlue Nile. If the company wins, payment will be effected according to a common system at PPESA, which consists of paying 35pc of the offer before the company is handed over and the rest in equal amounts, within the next five years.
Competition withBlue Nilecomes from Busberry, who have offered to pay 15.2 million dollars upfront. With current exchange rates as they are, this would amount to 280.79 million Br, which is way below the indicative price.
The company already has investments in Ethiopia, including shares in Dashen Brewery. It is also involved in the production of Spirits in other African countries.
Despite making the lower offer, Busberry believes it can compete because it is paying upfront and in dollars, according to its local representative, who requested anonymity.
Busberry is also a repeat bidder, having previously offered 15 million dollars, when Awash was auctioned for the fourth time. Its offer, then, was rejected by the Agency for being below the indicative price.
"We have done valuations and think that our offer is the appropriate price for the winery," the local representative told Fortune.
Besides Awash, the Agency also opened bids for Bilito Siraro Agricultural Development and Arba Gugu. Bilito Siraro, a 3,370 hct farm, in Oromia Regional State, was previously approved for transfer to Morell Agro Industry, a foreign company established in 2008, at a cost of six million dollars.
However, because Morell asked for an eight month extension to make down payments, the transfer was cancelled.
This time, it is Akir construction, which made an offer of 46 million Birr. Akir, a grade one construction company, which undertakes projects in building, depot, asphalt and gravel road construction, has offered to pay 35pc upfront and the rest in equal amounts over five years.
Its lone offer is below the indicative price for Bilito, set at 58.8 million birr.
Arba Gugu farm, where coffee is grown on a total area of 600ha, saw a late offer come in, when bids were about to be opened, from quality coffee export company, Alfoz Plc, established in 1998.
No offers materialized for Commercial Printing Enterprise, put on the auction bloc for the third time. Hamaressa Edible Oil Company also shared the same fate, as did the Agricultural Mechanization Services Enterprise.
Most of the bidders were present at the opening ceremony, carefully taking note of the price. For Awash, it was Doug Abgel and a representative from YHM consult who were present, but not Mulugeta.
Being informed of the bid, however, he is hopeful that he will finally be able to acquire the winery.
"If we gain access to Awash, we plan to expand the factory and also fully utilize the 500ha farm," Mulugeta told Fortune. "Previously only 150ha of the land was used."
8-Miles also hopes to hire winemaking experts from abroad and make a good return on investment.
The offers will next be evaluated by the bid committee and results will be transferred for approval to the Privatisation Board, chaired by government whip Aster Mamo.