The Skyrizon company and the Xinwei Group (both China) assumed a number of social and manufacturing obligations in their application to the Antimonopoly Committee of Ukraine for approval of a deal to acquire more than 50% of Motor Sich, a Zaporizhia-based producer of aircraft engines and gas turbines, including the obligation to preserve jobs and workers’ salaries and place sufficient orders to ensure development of Motor Sich, the CFTS portal reports, citing the Interfax Ukraine news agency.
According to a government representative, this is stipulated in a cooperation agreement that Ukraine (represented by the Ukroboronprom state defense concern) reached with Skyrizon and Xinwei Group on April 27 last year and a new shareholder agreement concluded on June 19, 2019.
The government representative added that these obligations also included investment in development of new engines, modernization of engines, and indexation of wages to inflation.
According to him, the ownership structure of Motor Sich before the decision on the possible deal was extremely confusing and opaque, and the company was linked to offshore companies and companies close to its honorary president Viacheslav Bohuslaev.
"As a result of the deal, the company should become part of a global public company with transparent management, control, decision-making, and market operations in terms of international law," the representative said.
According to him, the deal will give Motor Sich a chance to enter the Chinese market while preserving manufacturing in Ukraine. The representative noted that Motor Sich’s revenue has fallen more than six-fold since the Russian aggression of 2014 because Russia had historically been the main market for the company. This has forced the company to introduce a shorter workweek. The only adequate market for the company is the Chinese market, according to the representative.
“The agreements that were signed expressly prohibited supply of equipment and technologies from Motor Sich and its subsidiaries to such countries as Russia, North Korea, and Iraq directly, through intermediaries, or through [the proposed assembly plant in] Chongqing. Therefore, speculation about possible deliveries to the aggressor country is irrelevant," he said.
The representative also said that Motor Sich, unlike the Zaporizhia-based Ivchenko Progress Engineering Design Bureau, has been a private company for more than 25 years. According to him, Motor Sich is not considered a strategic company under Ukrainian legislation, and it was listed on the stock exchange until recently (a court suspended trading of the company’s shares in April 2018 at the request of an investigator at the Security Service of Ukraine).
As the CFTS portal reported earlier, the Chinese companies will provide a grant of USD 100 million to Ukraine if the Antimonopoly Committee authorizes acquisition of more than 50% of Motor Sich. Provision has already been made for these funds in the special fund of Ukraine’s state budget for 2019.