The General Secretary of the Ghana Federation of Labor, Abraham Koomson, has strongly opposed the proposed sale of SSNIT hotels, citing findings from the SSNIT Transaction Advisory report.
According to him, the SSNIT Transaction Advisory report reveals that the Rock City Hotel’s (RCH) funds are insufficient to purchase the shares in question, thus further disqualifying the sale.
“So why are they not making profit? If you read the SSNIT Transaction Advisory report, Rock City Hotel’s funds are not enough to purchase the shares being talked about. The SSNIT Transaction Advisory report disqualifies the sale,” Koomson told Nana Yaa Brefo on Onua FM, July 9.
He explained that according to the report, while the financial due diligence on RCH was generally satisfactory, it highlighted significant concerns regarding the financial capacity of RCH given the transaction’s size.
The current proposal does not demonstrate the financial strength to meet the semi-annual payments of $7.8 million, as RCH’s projected revenues for 2024 fall short of this requirement. Therefore, RCH has not met the financial due diligence requirements to undertake the deal in its current form.
Koomson’s statements come amidst ongoing discussions about the future of these properties.
According to the General Secretary, the primary motivation for selling the hotels appears to be their lack of profitability and for this, he argues that there should be a prompt change in management rather than a sale.
“Are they saying hotel businesses are not good? You’re saying the SSNIT hotels are not making money, so I compared and analyzed to find out if it’s a management issue. Then they should remove the current Management because hotel business is not bad, especially with where these SSNIT hotels are located,” he said.
Koomson’s comments suggest a need for a thorough review of the management practices rather than divesting the properties.
Summary of the report
The issues making the offer unacceptable, according to the General Secretary of GFL, is the Extended Payment Period. The proposed two-year payment plan introduces a prolonged period of uncertainty during which SSNIT’s strategic objectives will be on hold.
The second is the Unequal Bidding Terms which suggests that other bidders did not have the option to spread the payment over two years, which creates an uneven playing field.
Third, Public Scrutiny, A two-year transition period could subject the transaction to extensive public scrutiny, potentially impacting its success.
Forth, Unconfirmed Funding Sources which suggest the proposal lacks a clear indication of the source of funds for the balance of the acquisition price, raising concerns about RCH’s ability to complete the purchase.
Fifth, No Bank Guarantee: The absence of a bank guarantee in the latest proposal fails to provide SSNIT with the necessary financial security.
Sixth, Non-Aligned Objectives: The proposal does not meet SSNIT’s objective of selecting a strategic partner with the required expertise and financial strength to turn around the fortunes of the hotels. SSNIT aims to limit its equity holdings to 26%-49%, which is not addressed in the current proposal.
Seventh, Lack of Immediate Full Payment: SSNIT prefers a cash transaction with full payment in exchange for the shares and management control, which the current proposal does not fulfill.
Eighth, CAPEX Commitment: The CAPEX funding plan, which includes a 60/40 ratio contribution by RCH and SSNIT, may add financial strain and complexity.
Ninth, Inadequate Financial Capacity: Financial due diligence indicates that RCH’s financials cannot support the semi-annual payment requirement. RCH’s projected revenue for 2024 is insufficient to meet the installment payments, and the company lacks the necessary cash reserves.
RECOMMENDATIONS BY THE SSNIT TRANSACTION ADVISORY TEAM
1. Insist on Full Payment: SSNIT should require full payment upfront to minimize financial risk and ensure immediate transaction closure.
2. Fallback Option: If RCH cannot make full payment, SSNIT can offer RCH the option to purchase only one lot with 100% payment of the agreed price. RCH can negotiate an option to buy the second lot with a fixed expiry date for the option.
3. Bank Guarantee: RCH should be required to provide a bank guarantee to assure SSNIT of their financial capability to complete the transaction.
4. Revised Term Sheet: SSNIT should attach a revised term sheet template backed by a bank to clarify the required financial information and guarantee terms that RCH must provide.
