A Libyan textile company has acquired a 60% stake in Tri-Star Apparels, giving it effective control over the only Ugandan firm exporting clothes to the US under the duty-free African Growth and Opportunities Act (AGOA).

Sources close to the deal revealed that the Libyan Africa Portfolio (LAP) Textiles will form a partnership with the Government, which will retain a 30% stake, while Tri-Star will keep 10% shareholding.

"Lap Textiles, a Libyan company, has acquired majority shares in the Apparels Tri-Star, while the Government and Tri-Star will retain minority shares. All we can say is that the deal is done," the source said. The finance ministry confirmed that the transaction had been concluded.

"I know about a Libyan company, LAP Textiles, acquiring a majority stake in Tri-Star. But I am not able to give the details since the investment minister is dealing with it," the source in the finance ministry said.

Investment minister Semakula Kiwanuka said the Government's plan was to restructure the company to make it a private-public limited liability company.

Speaking guardedly, Kiwanuka confirmed that a Libyan investor was one of the big investors considered.

"The plan is to have a big private investor, the Government retains shareholding and management also gets a shareholding. The big investor is to take 60%, the Government between 25 and 30% and management 15 to 20%," explained Semakula.

"This principle has been agreed upon now. The issue is to bring in big money because if not, you continue limping and looking at the Government for funding," he elaborated.

The source said the Libyan company was contacted by the Government to take over the factory. After a team from Libya came and assessed the venture, they decided to invest $33m in the spinning and weaving plants to boost the company's production and competitiveness.

Kananathan Velluppillai, Tri-Star's managing director, confirmed the move but said further details would be availed as the process is concluded. The private company that was incorporated in 2002 to manufacture tariff-free textile exports to the American market under AGOA.

The company was given direct government funding and borrowing guarantees to commercial banks by the Bank of Uganda, on the instructions of the President.

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In July 2006, Tri-Star closed due to logistical problems and loss making, sending home hundreds of workers.

The Government had already given Tri-Star more than sh24b in loans and subsidies before the factory closed.

The Government wanted to recapitalise Tri-Star with sh20b funding, which did not materialise. This made it necessary to invite another partner to revamp the project.