Umicore and Picogiga deal falls through - update
The successful conclusion of the deal relied upon three conditions being met. The first two, short-term restructuring of the debt and the disposal of Picogiga’s holdings in Modulight, were agreed upon. Umicore’s withdrawal centers upon the third condition that involves the tax implications to Umicore of the restructuring.
Part of the deal meant that convertible bonds (see related links) worth 38 million Euros would be converted into 4 million Euros worth of Picogiga stock. The value of the additional shares places a tax burden upon Picogiga. It is the level of this taxation that Umicore apparently has an issue with.
“We do not agree with Umicore’s decision because the amount of tax payable is small compared to the total cost of the financial restructuring. The payable tax would be 1-1.5 million Euros, compared to the restructuring costs of 40-45 million Euros,” said Linh Nuyen, president of Picogiga.
In a French press release, Picogiga expressed its lack of understanding for Umicore’s unilateral decision to withdraw which it said “jeopardized Picogiga’s vital interests which need to be protected by an appropriate means.”
However, the two companies are looking at the figures and the impact of the tax burden in different ways. Umicore s CFO, Marc Grynberg, thinks that Picogiga is underestimating the size of the tax bill and also thinks that a comparison of the tax bill to the overall restructuring cost is irrelevant.
"What is relevant is the comparison of the tax impact with the amount fresh cash injected into the company," said Grynberg. "The size of our investment was to be 5.5 million Euros and if a substantial part of that is eaten up by tax then the deal makes little sense. This is why this [tax issue] was specifically included as one of the closing conditions.”
Picogiga is citing the disposal of its interest in Modulight as being the focus of a claim for financial reparations from Umicore. The company sold its stake back to Modulight for significantly less than it originally paid. “Our lawyers are working on this and I have given them a deadline of November 8 to solve the problem. The substantial indemnity that we seek from Umicore will give us time to find another solution and restart the [debt financing] processes that were interrupted by the Umicore agreement."
