They still lost. The Lithuanian government concurred with Finance Minister Algirdas Semeta's proposal to reject Parex's offer and announced Sept. 23 it would hold the LZUB privatization process anew.
Vilnius claims Parex not only submitted an unacceptably low offer, but also violated filing procedures. Parex representatives, however, say Lithuania consistently displays a bias against Latvian investors.
Last month, Lithuania yanked another apparent privatization victory from a Latvian company in the shipyard repair company Vakaru Laivu Remontas privatization and awarded it instead to a Lithuanian-Ukrainian-Norwegian consortium.
In the LZUB tender, four banks initially showed interest during the first round, but Parex was the only competitor that submitted a bid in the second round.
According to local press reports, the Latvian bank's offer of $500,000 and plans to invest tens of thousands more dollars in the bank, did not meet the LZUB's estimated value. Tender procedures were also reported to have been violated when the envelope containing Parex's bid was given to Lithuanian officials unsealed.
Parex Bank spokesman Maksim Ter-Oganesov said the bank was "surprised" by Semeta's proposal and feels Parex is the actual winner of the tender.
"Semeta said the envelope was not sealed, though we thought that it was," said Ter-Oganesov. "Our offer may have been a small sum, but we were planning on investing hundreds of millions of litas in that bank."
Ter-Oganesov drew comparisons to the shipyard deal and said it represents an anti-Latvian pattern in Lithuania.
"We suppose the government and businesses don't like Latvians and they don't like our [investing] in Lithuania," said Ter-Oganesov. "Our bank thinks that the Lithuanian government, its Finance Ministry and Privatization Agency would not sell any of their factories and banks to Latvians. They'd sell them to Lithuanians, Poles, Finns and Swedes, but not to us."
The Parex spokesman said the bank is waiting to hear an official response from the Lithuanian government before issuing the same threat as Rigas Kugu Bevetava, the Latvian shipyard that lost its privatization bid, to take the case to the Council of Europe.
Eugenija Martinaityte, director of the Banking, Insurance and Finance Institute, appeared sympathetic to both sides, calling the confusion a "complicated situation."
"Formally, Parex is right," said Martinaityte, "But they also have problems related to the Russian crisis. As a whole, Lithuania is under the pressure of the crisis' future influence. At the moment, banks here are quite stable. However, it is important to keep in mind that some effect could come about [into this sphere] as well."
Imandra Dauskiene, a spokesperson for LZUB, said the bank has no official comment, but noted LZUB employees are maintaining an optimistic attitude toward the situation.
"It is worthwhile to be privatized and everything is favorable about it," Dauskiene said. "Despite the Russian crisis, I don't think it will strongly affect the process. Sooner or later we will be privatized."
Dauskiene said LZUB has shown a 14 million litas ($3.5 million) profit so far in 1998.