- Unisync (UNI) withdraws its OCFC2 bid
- The bid was initially intended to be put in place in the months to follow
- It involved terms of five years with many renewal provisions resulting in a potential term of up to twenty years and estimated gross revenues exceeding 1 billion dollars
- The long-term fixed-fee contract that commences about two years following bid submission was deemed to be a risky financial decision
- This affected not only Unisync but also its suppliers, who tend to be smaller businesses
- Unisync (UNI) is down over 8 per cent, trading at C$2.75 at 11:59 am ET
Unisync (UNI) has reassessed the economic feasibility of a previous opportunity with the Department of National Defence.
The bid was originally intended to be put in place in the months to follow.
In addition, it involved terms of five years with many renewal provisions resulting in a potential term of up to twenty years and estimated gross revenues exceeding 1 billion dollars.
After the company assessed the risks of the situation, it decided that there would no longer be a sufficient return or invested capital and would therefore withdraw its proposal.
The said proposal was drawn up back in August of 2021.
The concept of a long-term fixed-fee contract that commences about two years following bid submission is, in itself, seemed to present itself more as a risky financial decision and less of a smart, calculated maneuver.
Many companies are feeling a current pinch due to soaring interest rates, cost of workers, transportation costs, and warehousing costs. As Unisync would be considered the ‘prime contractor,’ the company would be locked into a fixed rate management fee for the duration of the contract.
This challenge was further exacerbated due to the inclusion of value proposition commitments under the Industrial and Technological Benefits (ITB) Policy for the life of the contract and the lack of a foreign exchange adjustment provision.
This not only affected Unisync but also its suppliers, who tend to be smaller businesses. With being locked into a firm unit price, there is no financial leeway when speaking of inflationary factors the industry is feeling.
“As a prime contractor, we felt we have a responsibility for the future viability of our suppliers and would find it counter-productive to hold small subcontractors to their pricing and supply commitments when doing so could put them out of business,” stated a representative of Unisync.
Unisync is a Canadian-owned public company committed to textile opportunities covering various departments and agencies of the Government of Canada.
Peerless Garments is a Winnipeg-based manufacturing subsidiary of Unisync that supplies clothing to the Canadian Armed Forces and will continue to do so.
In a statement from the company, they are optimistic and firm about their withdrawal, “We are confident that management, infrastructure, and capital resources previously required for the OCFC2 bid can be readily deployed to other attractive, lower risk managed workwear opportunities throughout North America.” added Unisync.
Unisync (UNI) is down over 8 per cent, trading at C$2.75 at 11:59 am ET.