In lottery company privatization, state is the biggest loser

On Friday October 11th Greece finally saw the completion of its first major privatization deal. Emma Delta, a Czech-Greek fund, acquired from the Greek state 33 per cent of OPAP, Europe’s most profitable lottery company, for €6.19 per share. The shares were being traded at €9.13 on the Athens Stock Exchange on the same day, meaning that the company’s value was almost 50 per cent higher than what the new owners had agreed to pay when signing the deal last August. 

 

The discrepancy is striking: OPAP’s current market evaluation is €2.912 billion. Its evaluation when it was sold two months ago was €1.974 billion. Today, 33 per cent of its stock that was sold off is valued at nearly €1 billion. However, the state will put in its coffers only €652 million: €622 million upon the share transfer that was finalized on October 11th plus €30 million, split in 10 yearly tranches. 

 

In other words, the Greek state and its representatives might have succeeded in selling the company but did they succeed at getting a good price? Judging by OPAP’s current market value, they failed. “Is it luck?”, as the company’s popular television ad says. The people heading Greece’s privatizations agency HRADF are not lowly civil servants who botched their jobs – they are well-trained technocrats. For example, the agency’s C.E.O., Ioannis Emiris, is a former senior executive at Alpha Bank, one of the country’s biggest private banks. 

 

It would seem that the Greek state is a shareholder who lost out, while all the others, and especially the new owners of the stake sold off by the state, have already benefitted from the transaction, pocketing a notable difference in just two months. 

 

Bet and win

 

Moreover, OPAP’s new major shareholder, Emma Delta, took advantage of the sharp share price increase to secure a €400 million corporate bond, as to complete the purchase. The bond was issued in two chunks: €250 million at 8.5 per cent interest and €150 million at 12 per cent (grossly 9.8 per cent for the whole). The share price spike covers a great part of the loan’s cost. 

 

According to data from an Emma Delta bulletin published at the time of the bond issuing, investors put up only €274 million of their own money to buy 33 per cent of OPAP.

It all comes down to a financial game that favours the new investors to the detriment of the public interest. The new owners of the state’s 33 per cent stake in OPAP will be conceding a significant part of their gains to interest payments. The only consolation so far is that, should the price of OPAP stock rise further and the investors choose to sell their stake within six months, the Greek state will get half of any gains made. If Emma Delta investors choose to sell in between one and three years, the Greek state will get 25 per cent of net gains made. 

 

Who put up the €274 million 

 

Emma Delta is a Cyprus-based investment fund, managed by Emma Delta 

Management Ltd, 67 per cent of which is owned by Czech Jiří Šmejc, a Czech, and 33 per cent by George Melissanidis, the son of Dimitris, a businessman and shipowner. 

 

According to Emma Delta, the investors who raised the €274 million were: