Lazard, a former investment bank from France operating globally, has been engaged by PDVSA to sell CITGO. Lazard describes itself as “the world’s leading independent asset management and financial advisory firm.” A leaked document to this website provides the clearest insight yet into Lazard’s relationship with PDVSA regarding the details of CITGO:
…the engagement of Lazard Frères SAS (“Lazard”) to act as investment banker for Petróleos de Venezuela, SA (“PDVSA” or the “Company”) in connection with a potential sale, whether direct or indirect, of all or a substantial part of the business or assets of its subsidiary CITGO Petroleum Corporation (“CITGO”), to one or more corporations, companies, governmental entities, or individuals (each, a “Buyer”), in one or more transactions, each of which may take the form, without limitation, of a merger, asset sale, equity securities, or other interests (each, a “Transaction”).
Reuters recently reported that “the state oil company PDVSA is working with the investment bank Lazard Ltd to sell its North American unit, Citgo Petroleum Corp, according to people familiar with the situation.” Adding:
Representatives from Citgo and Lazard declined to comment. The individuals requested anonymity because the matter is private.
Lazard has not publicly refuted Reuters regarding its alleged relationship with PDVSA or the intended purpose of that relationship, namely, to sell CITGO.
Where Reuters erred was not questioning its sources about the rationale provided for the decline to comment: selling a state asset (CITGO) is not a private matter. Hence, the question in the title: what bidding organized by PDVSA for the divestiture of CITGO did Lazard win?
Lazard, like countless local and international firms favored by Chavismo, did not win any bidding. In fact, no offers were made. Their retention for the sale of CITGO is merely another example of the rampant corruption of a dishonest administration that fails to understand the distinction between the state and private assets. How many board meetings at PDVSA have discussed proposals regarding the divestiture of CITGO with its shareholders? How many discussions about CITGO divestment have occurred in the Venezuelan Congress?
According to the agreement—signed by Matthieu Pigasse, Francois Funck-Brentano, and Jesús Luongo of Lazard on behalf of PDVSA—Lazard is costing the Venezuelan treasury $100,000 per month. If it achieves the “consummation of a transaction” for a “total consideration of up to $7 billion,” it will earn a “transaction fee” of 0.5%. If the “aggregate consideration” exceeds $7 billion, Monsieur Pigasse et al. will receive 0.75%.
There is no doubt Lazard is working diligently to secure its rightful earnings. A report last week placed Lazard at the center of a “preliminary offer” between Hovensa—a jointly owned refinery by Hess and PDVSA in the U.S. Virgin Islands—with limited capacity to gather capital and experience in refining. This deal, still pending, occurred after Hovensa hired Lazard in late November 2013 to sell the refinery, and only a fraction of the 140 contacts made by Lazard submitted an offer.
Lazard’s intention with CITGO seems to be to dismantle it and sell it in parts, as it deems unlikely to find a buyer willing to purchase the entire company. It remains to be seen how the sale of CITGO’s selective businesses will impact PDVSA’s marketing prospects in the U.S. and, consequently, Venezuela’s revenues.
Lazard will rely on the “exclusive discretion of PDVSA” should applicable law require it to “disclose any Confidential Information” related to the commitments of selling CITGO, allowing PDVSA to “seek a protective order or other appropriate remedy or waive compliance” with the agreement terms. In light of the numerous pending lawsuits filed against PDVSA, it is uncertain how PDVSA could possibly “waive compliance” regarding matters linked to CITGO divestment when New York is the jurisdiction whose laws are said to govern the agreement.
There has been no word from Venezuelan opposition politicians concerning Lazard’s “various matters” with PDVSA.
A request for comment sent to Matthieu Pigasse at Lazard went unanswered.
UPDATED 24.09.2014: the BBC reports that Venezuelan President Nicolás Maduro denied that Venezuela is planning to sell CITGO during an event yesterday in New York. President Maduro’s statements contradict all evidence published to date regarding Lazard’s involvement in CITGO divestment.