Ontario has hired CIBC World Markets
Inc. and Goldman Sachs Group Inc., both experienced in privatization, to draw up a blueprint for potential sales. Among the possible sales are Hydro One Inc., the Ontario Lottery and Gaming Corp., the Liquor Control Board of Ontario and Ontario Power Generation, sources said.
I'm not sure if Dalton McGuinty can talk fast enough to be a good auctioneer, but we're about to find out.
That doesn't impress OPSEU much.
Thomas also noted that privatization would threaten the wages, benefits and working conditions enjoyed by many full-time LCBO employees.
“In dozens of communities around Ontario the LCBO is a source of employment and a “destination retailer” that attracts other retail businesses. Why tamper with a formula that has worked so well on behalf of all Ontarians?
“Slaughtering the goose that annually lays golden eggs for the public purse is a half-baked strategy that should be put to rest for good.”
Hey, everyone, look [url=http://www.rabble.ca/babble/canadian-politics/duncan-new-flaherty]over here[/url].
Here we see once again the only difference between the Liberals and the Conservatives.
The Conservatives inflict the neo-liberal agenda with malice and exuberance; the Liberals seemingly reluctantly and somewhat apologetically. The end result, however, is not in any way different: either way, the commons are raped and pillaged for the benefit of the investor class.
I scanned the other thread but couldn't make much sense of it. Maybe we can try again here.
I think McGuinty is tossing a "sell the assets" smoke bomb out into the media for people and pundits to get worked up over. This must be part of the pre-budget process when the gov debt is 24 billion (and likely higher come real budget time).
I doubt McGuinty and the Libs will sell off anything like the monopoly on liquor and legalized gambling. I assume that this will simply form the lever for cutting services and freezing budgets, like the 2% health care issue:
http://www.lfpress.com/news/london/2009/12/25/12267481.html
So, no sale of the precious gambling racket, but zap, you're frozen, budgets for hopsitals. Neat trick. Don't even dare mention freezing the budgets of say, all gov departments, teachers, police, etc. Nope. Straight to the heart of the matter. Save the booze and casinos, don't mention any other gov workers\services, but make sure and tell everyone reading the holiday headlines that the hospitals will be operating on a shoestring.
Hmmm. Goldman Sachs, eh.
I get it now.
The Libs will sell Ontario Hydro, but only after guarenteeing the new feed-in green energy program's incentives with public money. So they'll be getting rid of an asset (though some would debate the quality of service OntHydro has provided, working up big debts of it's own) to investors who will have parts of the power grid supplied by green juice... paid for by the gov... likely giving whatever companies or hedge funds or private equity firm that buys OntHydro a big leg up on the soon to be enshrined cap and trade market.
And taxes will go up and services will be cut.
Yes, but Goldman Sachs will be okay, and in the end, that's what counts.
GS has done quite well in the US by welding together a political and public and private financing scheme. The free market really does work better when it's backstopped by an bottomless public purse which the people have no real control over. I seem to remember the company claiming it made 3 and a half billion in the first (second?) quarter of 2009.... Yay.
Surely Goldman wouldn't be interested in creating a scheme - paid for by the public - to buy the public assets at a firesale price?
GS to Lib caucus: "It's not worth much, but here's how it should be sold."
Lib caucus: "Hrm... seems a little cheap. But these dudes know what they're doing. Quite a lot of them are working in the White House right now, so we'd best follow this handy blueprint."
GS: "Or we can save y'all from reading the plan. We'll toss you a couple million for this and that right here and now. Oh, do you mind if we borrow the money from Ontario in the form of a loan guarentee?"
Dalton to Duncan: "They offer you a consultantcy gig, too? Can't wait until 2013!" [high fives ensue]
Meanwhile, the ghosts gathered where Montgomery's Tavern used to be shake their heads at us.
Making things a little more juicy would be for, say, the Ontario Teacher's Pension Fund to buy up the assets and then start cracking down on labour costs.
It's about the children! And teaching time! Not money, no way.
Now now, Farmpunk. The pension fund is administered by a third party, the teacher's union can't tell them how to invest that money.
And when they say that, they actually have a bowl of water handy in which to wash their hands.
I just can't help it, TP. The power of Ontario teachers is immense and cold blooded. The biggest employer in the London area is the Thames Valley district school board. When they signed their latest contract for high school teachers, putting the top tier salary into three digits, I gave them a call and asked for a phone interview with the head dude.
He wasn't in on Thursday. He wasn't in on Friday. He never did call back. This was last fall, if memory serves... you know... economic meltdown, London-St Thomas systemic unemployment.
The roll call of public servants who answered their phones and consistently called back during the same time included some of the favourite progressive rented mules: local Cons, PCs, Libs, Tom Gosnell, Deciccio-Best.
Sigh. But I agree. The Fund does need to maintain an almost impossible level of return to ensure retirement benefits. Because it's clear the gov won't be able to backstop those pensions.... unless the teacher's lobby has even more pull than I thought.
Manufacturing work sustained a somewhat level playing field between public and private workers' income in Southern Ontario. That is now gone, along with all the tax benefits of having well paid workers in places like St Thomas and Windsor, not to mention localized business taxes that help pay for local school boards and other public serives. When the last time we heard of public servants losing their jobs or being cut back - outside of health care?
Where's the money going to come from? Isn't that what McGuinty is really putting out in the public with this chatter about asset sales? What can be sold and what can be cut?
And here I though bankers and CEO's were the problem, nope them darn teachers and their union.
Big picture dude.
Yeah, I got a little off topic.
But the pension funds are investment organizations just like Goldman Sachs. And they want those money-making assets just like those greedy CEOs and investment bankers we all love to hack on.
From the OP article:
"Sources say pension funds such as Ontario Municipal Employees Retirement System have already expressed an interest in the 604-outlet LCBO. The company made $1.4-billion in profit in 2008, almost all of which was handed over to the government in the form of dividends, and it has seen its profit rise for 15 straight years.
If the LCBO is going to be sold, I'd rather have the OMERS buy it than Goldman (note that I'm not sure if Goldman is interested; hard to believe they aren't). But such a purchase would still be a concentration of wealth away from the public and into the private sphere.
If the LCBO is going to be sold, I'd rather have the OMERS buy it than Goldman (note that I'm not sure if Goldman is interested; hard to believe they aren't). But such a purchase would still be a concentration of wealth away from the public and into the private sphere.
I seriously doubt Goldman will buy it - they've been retained to "draw up a blueprint for potential sales" - in and of itself that's many millions of dollars of consulting fees for simply studying the question.
If the decision is made to sell the LCBO I'd expect Goldman to end up as one of the underwriters (I'd actually be surprised if they don't end up as lead underwriter) but I wouldn't expect them to be "the buyer". [Whether it ends up being sold to one of the pension funds as suggested by others, spun off via an IPO to the public, or sold to some other entity (e.g., a major liquor company) is another question.] End result is they end up with some truly massive fees but none of the risk (or headaches) involved with owning what was formerly a government monopoly.
Having said all that, I've been saying for years that, if government is truly interested in a cash lump sum today as opposed to an ongoing stream of earnings all they have to do is to securitize the cash flow - that is, issue a bond that's to be repaid out of future profits. That way the government gets a big lump sum today but gives up most of the profits from the LCBO for the next however many years and, most importantly, still owns it so that down the road they'll start collecting income again (and it won't change the employer/employee relationship with the government).
Any public service/utility going on the market these days will be leapt at by every pension fund on Earth. Anything that we can't do without (and booze is just about in the category of electricity) is a steady income earner, much sought after in any fund. But selling out to even public pension funds sure as shucks isn't going to help Granny Grinch, widow, age 75, without private pension or CPP. The earnings from booze and those poor bastards silly enough to gamble, will help provide services to her. Will help to make up for the taxes not paid by the leisure classes.
(And those teachers are in for an awful whacking over the next decade, Farmpunk. Jeez, I remember when $40,000 was considered too much for the director of education (1966). But have you read Woody Tasch's Slow Money: Investing as if food, farms, and fertility mattered. ? Another investment opportunity in a rather important commodity? It's still early days, but I think (and hope) he's telling us what is to come, for investors and growers of food).
Abnormal, solid points.
Clearly there are many ways to slice up a potential public company going private. And I've created a situation that is pure speculation. But Goldman getting paid to advise the government on how much the LCBO is worth and how to go about selling it is just too full of weird scenarios for me to ignore the most obvious - Goldman's plan; Goldman's buy. How much easier does it get than that for a company that has proven itself to be incredibly shameless? Possibly just as shameless as the McGuinty Libs making a suggestion about selling profitable sectors while trying to rationalize it as intelligent debt reduction policy.
GV. I'll check out that book. However, I'm very leery of any book written about how the future of farming is going to be rosy. That's a prediction that comes out regularly on a three to four year cycle and goes back decades. And I'm sure Bookish Agrarian has some handy stats that I, personally, take as a very credible and real source.
The food industry will continue to make BIG money, whereas farmers may not. That's simply the way it works.
Haha, seems like I'm getting into the game of speculating on the speculators. Anyhow, some links that give me the fear.
Definitely worth reading for those with an interest in Goldman Sachs.
http://www.smirkingchimp.com/author/matt_taibbi
This site is a little too technical for me to follow but I'll post it here anyway because it's an interesting read, with a lot of opinion and stories related to the world of investment:
I'd like to double-back to Abnormal's point about Goldman not being the single buyer of Ontario's assets. Is there some kind of trade\investment rule that would keep a US based investment fund\firm from purchasing Ontario corps? Wouldn't that be a trade-law\NAFTA no-no?
I'd like to double-back to Abnormal's point about Goldman not being the single buyer of Ontario's assets. Is there some kind of trade\investment rule that would keep a US based investment fund\firm from purchasing Ontario corps? Wouldn't that be a trade-law\NAFTA no-no?
Good question but I expect that there are numerous ways around any such rule.
But as I said, I wouldn't expect Goldman to be the buyer - they'll either arrange for it to be sold to someone else or turn it into a public company via an IPO. In either case they'll collect a few hundred million in fees. Once it's traded on the relevant exchange there's nothing to stop any suitor from taking a run at them. [As an aside, this approach also guarantees that the government can't possibly buy them back - no way is any politician that has any hopes of being re-elected going to raid start raiding peoples investment accounts.]
I didn't phrase my questions properly. I suspect there is no rule against a single foriegn entity buying the LCBO if it goes up for sale. The US is the most likely country of origin for a purchaser and I would guess NAFTA rules prevent a stopping such a purchase. Free trade and all that.
I need to clear the cobwebs out of my head.... When I say Goldman\etc want to buy the LCBO I mean precisely the IPO method. Wasn't that how BCE was going to be sold? (Ont teachers fund was waiting with cash in hand, haha, couldn't help myself). As you said, Abnormal, investment firms don't want any part of the bricks and motor business.... they want the return on investment and little else.
But a big private equity firm, a massive hedge fund, could conceivably be a single purchaser. Cereberus? But isn't Cereberus just a conglomerate of fundies?
Haha, another freaky purchaser: I wonder if the US gov would buy Ontario's LCBO.... at Hank Paulson's suggestion!
There would be no buy-back, either, I agree. The cost would be immense, because once the gov announced it was interested in re-purchasing, the stocks would no doubt skyrocket, because it's clearly been proven the gov will spend whatever it likes, whenever it likes....
This is a really weird scenario. It just seems so blatant and shameless. And I'm just talking now about the gov paying Goldman Sachs to draw up a plan. Because nothing is for sale.... yet.
I thought BCE was going to go as an income trust. At least until Harper reneged on an election promise and changed the tax treatment of those beasts.
