Банкеръ Weekly



The merger of the Sofia-based glass-maker Stind into the Plovdiv-based enterprise Drouzhba will be completed by April 2003. Thus, Stind will end its existence, and Drouzhba will become its universal inheritor.In that way the plans for the enterprises' tranformation, dating back to the year 2000, will be realized. This step in the development of the two companies is only natural, as they have one and the same owner - the Greek glass-maker Yula Glassworks. The Greek company presently owns 99.9% of Stind (through the Cypriot firm Glassinvest) and 97.3% of Drouzhba (through Barek Overseas).Last week the plan for the merger of the two glass-making enterprises (worked out by the law company Lega Interconsult) was approved by the State Securities and Exchange Commission (SSEC). This was necessary because Drouzhba is a public company and the law stipulates that the commission should approve the shares' prices and the rate of exchange. When the SSEC made public its decision it announced it would admit again the Plovdiv-based company's shares for trade on the stock exchange. A ban on the deals in Drouzhba's paper was imposed due to the leak of inner information about the merger, which could result in manipulation of the stocks' prices.According to the plan, the fair price for Drouzhba's shares is BGN15.15/apiece, and for Stind's shares - BGN0.80/apiece.The small shareholders in the Sofia-based company are about 60 and they will be able to acquire a share in the newly-established enterprise, corresponding to the share they held in Stind. Most probably 19 stocks in Stind will be exchanged for one stock in Drouzhba. However, Stind insiders declined to reveal any details regarding the exchange before the shareholders were acquainted with the plan. Currently, Drouzhba's capital is around BGN3.4MN, while Stind has increased its equity to BGN59.5MN.Our aim is to complete the transformation by April 1, 2003, Dimitar Slavchev, a lawyer from Lega Interconsult, said. The two enterprises have to hold general meetings of shareholders to approve the merger.The Greek company has studied the Bulgarian glass industry for seven years before investing in this sector. In 1997 Yula Glassworks through the Cypriot off-shore company Glassinvest purchased 70% of Stind at USD4MN. The new owner of the Bulgarian producer of bottles undertook to invest in the enterprise at least BGN27MN within five years. The privatisation contract has been observed and Stind is presently the most modernly equipped enterprise in the Bulgarian glass industry. The machines have been supplied by the German firm Sorg, the US Emheart, and the Italian Botero. A new furnace has been commissioned in the enterprise. Its production capacity is 100,000 t of glass, or 200 - 250 million bottles a year, depending on their type. The output of the glass manufacturer is maintly intended for the brewing and wine industry, as well as for Coca-Cola and Pepsi-Cola. Within a few years Stind's share on the glass market has increased from 10-12% to 30% last year. Due to the drastic shrinkage of the domestic market, Stind has directed its attention to the markets of Central and Eastern Europe, and Italy.Yula Glassworks strengthened its presence in the Bulgarian glass industry in January 1998 after buying a majority share in the capital of the leader in this sector - the Plovdiv-based Drouzhba. According to 2001 data, it accounts for 35% of the sales in the branch. The enterprise was acquired by the Greek company through Barek Overseas Ltd., which was set up especially for that deal. Then a 51-percent stake in Drouzhba was purchased at USD20MN.The privatisation of Drouzhba was delayed and the enterprise is technologically behind Stind. We expect its equipment to be enirely renewed in 2003, said Dimtar Koev, Executive Director of the Sofia-based company, who is also BoD member of Drouzhba. Opportunities for the production of household glassware have been considered in Drouzhba as well, but for the time being only bottles and jars will be manufactured. According to Mr. Koev, the domestic market is of priority importance to both companies, but its development of course is strongly dependent on the condition of wine-making and food industry.After the merger between Drouzhba and Stind, the new company will become a monopolist on the domestic glass market. According to Mr. Koev, it will account for about 75% of the sales in Bulgaria.Under the Protection of Competition Act, there are no problems for the merger to be effected. According to the legal provisions that transformation of the two companies shall not lead to concentration, Dimitar Slavchev commented.An interesting fact is that the two enterprises are increasing their market share due to decommissioning of companies in the branch, and not because of increased output. The entire branch is experiencing difficulties due to the shrank consumption of glassware and the high prices of natural gas. One of the former leaders among domestic glass-makers - Diamant of Razgrad - is currently in insolvency procedures. Kitka of Novi Pazar and Kvartz of Sliven are in the same situation. Drouzhba and Stind were also operating at a loss until last year. However, the Plovdiv-based enterprise has posted a profit of BGN6MN-plus for the first nine months of 2002. The Pleven-based enterprise Rubin emerges as the only rival of the transformed glass-maker.

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