Банкеръ Weekly



Philip Morris, British American Tobacco, and Imperial Tobacco are the companies that purchased documents for participation in the tender for the purchase of Bulgartabac Holding's four subsidiaries. The deadline was set at August 2. Bulgartabac's Supervisory Board, including vice premiers Plamen Panayotov and Lidiya Shouleva, Finance Minister Milen Velchev, Minister of Agriculture Mehmed Dikme, and Deputy Minister of Economy Dimiter Ivanovsky, had four days to assess if the candidates satisfied the preliminary privatisation requirements which are: at least 5-year-long experience in the production of cigarettes and at least EUR500MN in proceeds from sales of tobacco products for the last year. On August 6 the members of Bulgratabac's Supervisory Board proudly made public the names of the bidders.Their pride is somewhat reasonable, having in mind that companies of such rank were yearned for during the first attempts to privatize the tobacco holding back in 2001. During the first divestment procedures, however, the attention of both Philip Morris and British American Tobacco was attracted, but finally the inadvantageous terms and the requirement for too big social commitments repelled them from filing real offers. The third attempt turned out successful and they entered the game. September 30 is the deadline for submitting the candidates' final bids. Before that they are required to transfer a bank guarantee of EUR1MN each. For quite a long time Philip Morris has been showing interest in Bulgartabac BT, the best company within Bulgartabac's structure. And British American Tobacco is said to be keen on the Sofia-based enterprise. It is not yet clear where Imperial Tobacco has directed its interest. Another open question is if the third successive procedure for the divestment of the Bulgarian tobacco monopoly will go on smoothly. Although the candidates' names are already known, there are quite a number of things to be specified, e.g. when and if the amendment to the Accounting Act, moved by the MP from the NMSII Mariana Kostadinova would be passed. The legislative change would allow Bulgartabac's Management Board not to ask the opinion of the minority shareholders and to decide itself where the money from the privatisation deal would go to. These and other details like that should had been settled before launching the sale procedure, but as people say better later than never. The future of the other cigarette enterprises is still unknown. It is yet to be seen which of them could be successfully rehabilitated and which would be slated for liquidation. According to Bulgartabac's Executive Director Georgi Kostov, only then looking for a buyer of the holding itself could begin.In fact, Bulgartabac is performing quite well now. Its profit for the first six months of 2004 amounted to BGN13.3MN, compared to just BGN2.2MN for the same period a year earlier. Sales revenues went up by BGN4MN, reaching BGN15.3MN. However, the main contributor to this financial leap is the BGN15MN in dividends, which the holding is to collect from its subsidiaries.In order to achieve one of the goals of the sale deal, the applicants will be allowed to buy just two of the four enterprises offered for sale. The companies are to be privatized in two separate blocks. One of them consists of 85.24% of the capital of Blagoevgrad BT and 78.18% of Sluntse-Stara Zagora BT. The other one includes a 78.22% stake in Sofia BT and 78.18% in Plovdiv BT.The results of the companies that have been put up for sale were presented on the floor of the stock exchange, too. Sofia BT ended the first half of 2004 at a profit amounting to BGN6MN, compared to BGN7.2MN in 2003. The lower result is due to the reduced amount of sales. During that period sales revenues reached BGN43.8MN.From January to June 2004, Plovdiv BT reported a BGN561,000 profit. The company's revenues total BGN13.2MN, but it also has uncovered losses of BGN1.4MN.The reports of Sluntse-Stara Zagora, which had been a loss-maker for a long time, are also optimistic. In the first six months of the current year it posted a profit of BGN801,000, following a BGN542,000 loss a year earlier. A few weeks ago the company initiated a recovery programme.Blagoevgrad BT improved its financial results significantly - its first-half profit reached BGN9.6MN, compared to BGN6.9MN for the same period of 2003. Its net revenues are up by nearly BGN10MN, reaching BGN91.8MN.At the same moment of 2003, Philip Morris and British American Tobacco competed for acquisition of the Serbian tobacco plants. The Americans managed to acquire a 64.5% stake of the capital of Serbia's largest tobacco producer, Duvanska Industria Nish, paying EUR518MN (the price includes EUR64MN worth investments and EUR66MN for social programmes). A few months later, Philip Morris added another 7.7% stake in the same company after paying EUR45.2MN.In turn, British American Tobacco acquired the DIV company. The investor paid EUR87MN for the acquisition.The leaders in the tobacco branch are currently competing on another front, too. Each of the two companies is ready to pay EUR1BN to acquire the Croatian tobacco plant Tvornitsa Duhana Rovini. Both of them submitted offers last March, but no winner has been announced so far.

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