Goldman Sachs is set to step into the breach after Merrill Lynch refused Turkish defense firm Aselsan's request for it to advise and underwrite its public offering because of a missile deal inked by Turkey with a Chinese company under U.S. sanctions, according to Aselsan General Manager Cengiz Ergeneman Hurriyet Daily News reported.
"If they are not in, there are other companies. There won't be any delay in schedule. The company at the second rank is the Garanti Yatirim-Goldman Sachs consortium," Ergeneman told daily Hurriyet in an interview in the Kazakh capital, Astana.
"If it is possible that you will work with the Chinese company, China Precision Machinery Export-Import Corp. (CPMIEC), we would not work with you," said Merrill Lynch in a letter sent to Aselsan.
Questioned by daily Hurriyet last week, Merrill Lynch confirmed that it had refused Aselsan's offer due to Turkey's missile deal with China, but declined to give further details of the letter said to have been sent to Aselsan.
Fifteen percent of Aselsan has so far been offered to the public, and the company has been talking with several international consultancy firms ahead of its second public offering. Ergeneman stated that a portion of Aselsan's shares was sold to foreign shareholders, while the rest of the shares were in the country.
Two intermediary companies from Turkey and overseas need to form a consortium to complete the sale. "We picked 10 local and 10 foreign intermediary firms. We asked them to form a consortium with each other. We received five-six offers. The most appropriate bid was submitted by the Halk Yatirim-Merrill Lynch consortium," he said before Merrill Lynch pulled out over fears that it could fall afoul of U.S. legislation if it has any business dealings with companies connected to CPMIEC, which is under sanction for violating the North Korea, Syria and Iran Nonproliferation Act.
Aselsan plans to go public between March and May 2014, but they will determine the date with the intermediary firm, Ergeneman said, adding that Turkish Aerospace Industries (TAI) also planned to go public.
Turkey needs national missile
Ergeneman said Turkey should have a "national" long-range missile system, but Washington has expressed "serious concerns" over Turkey's Sept. 26 decision to select CPMIEC to build the infrastructure.
"If we want a system controlled by ourselves, we have to make it by ourselves. After completing a medium-level air defense missile, we will also make a long-range [system]," he said. "We will be dependent on the basic design of the system that we choose. Turkey's engineering capacity is enough to do it."
Turkish Technology Minister Nihat Ergun said last month that Turkey chose CPMIEC because it alone met Turkey's demands for technology transfer and co-production.
"It wasn't a technological point that put the Chinese firm forward. Turkey's way of business has changed. We want a main technology transfer and the co-production of at least some parts in Turkey.
The reason for the selection was because the Chinese firm was ahead in the ease of technology transfer and accepted co-production," Ergun said. The reason Ankara eliminated the other countries in the bid is that their offers were not reasonable and they did not accept Turkey's demands, he added.
CPMIEC won the tender with a $3.44 billion bid, although the initial contract price was estimated at $4 billion.
The Chinese contender defeated a U.S. partnership of Raytheon and Lockheed Martin, offering the Patriot air defense system; Russia's Rosoboronexport, marketing the S-300; and the Italian-French consortium Eurosam, maker of the SAMP/T Aster 30.