Банкеръ Weekly



The new strategy for the privatisation of Bulgartabac will be probably approved by mid-October, the Deputy Premier and Minister of Economy Lidiya Shouleva said during the week. The long-awaited document should be approved by Parliament as well. The strategy is expected to include the divestment of the tobacco holding and of its individual subsidiaries.The deal will be effected in several stages. First of all Bulgartabac's subsidiaries abroad will be sold out through tenders or liquidated. The eight indebted enterprises (in Isperih, Doulovo, Vidin, etc.) will be sold out afterwards, and their privatisation will be followed by that of Yuriy Gagarin BT - the cigarette boxes and filters manufacturer.During the next stage the holding's shares in the factories of Blagoevgrad, Sofia, Plovdiv and Stara Zagora will be offered for sale through tender or on the stock exchange. Finally, the residual state-owned share in Bulgartabac Holding (that will be then owning only the building and trade marks) will be put up for sale.Big international companies such as Philip Morris, British American Tobacco, Gallaher, Altadis, and Imperial Tobacco, are expected to bid for the factories in Blagoevgrad and Sofia. The Deputy Premier Vassilev, who is in fact the author of the strategy for a 5-stage privatisation, hinted that the buyer of the residual share in the holding itself will be a company with a somewhat different profile (rather a financial investor). But it's not yet clear what the requirements to the investors would be or who will effect the sale of shares. The principle problem in the divestment is that not direct state participation in the subsidiaries is concerned, but shares, owned by Bulgartabac Holding. By law, the Privatisation Agency (PA) sells the state's participation in the capital of enterprises, as well as their self-contained parts. Therefore, they should be offered for sale by a decision of the holding's Supervisory Board, which is yet to be set up. But there is a more simple option. During the most recent amendment to the Privatisation Act (in April 2003) a provision was approved that the PA could sell shares and stakes, which are not directly owned by the State (e.g. Bulgartabac Holding's share in its subsidiaries) if it is entitled to do that. In that case (under para 9 of the law's Transitional and Final Provisions) the proceeds from the sale of shares in the subsidiaries shall remain within the holding and not remitted to the budget. But if that scenario is chosen, it will be extremely important when the so-called residual share in the holding will be put up for sale. That should be a year after the sale of the individual subsidiaries is completed, in order to enable the holding to distribute the proceeds from their divestment as dividends. (For instance, proceeds from bank privatisation entered the budget through the dividend, distributed by the Bank Consolidation Company). However, some ambiguities remain. For example, if Bulgartabac Holding decides to sell its overseas companies alone and authorizes the PA for the other ones, does that mean that there would be two different procedures - one under the Commercial Code, and another - under he Privatiastion Act? The other peculiarity is that the holding itself is in the special list of companies which are important to the national security, which requires the choice of its buyer to be approved by the Government. Bulgartabac' subsidiaries, however, are not yet in that list. Trade marks are another problem. Under the current situation, the buyer of the factory in Blagoevgrad, for example, cannot be sure if it would be allowed to produce Victory brand of cigarettes. In order to eliminate that risk the package of documents for the deal on each individual unit should include a licensing agreement for the respective trade marks. Otherwise, teh holding should transfer the trade marks to the respective subsidiaries prior their privatisation. Another big problem is the ownership of Bulgartabac's trade marks in Russia. With so many uncertainties it is not surprising why foreign investors have not shown interest towards the deal so far. In fact, only Philip Morris has a stable presence in Bulgaria at present, after British American Tobacco liquidated its subsidiary in end-2002. The bidders, who participated agressively in the last procedure for the sale of 80% of Bulgartabac Holding's assets, are also waiting for the time being. The Metatabac consortium is no longer the same, as the major shareholder in it Michael Chernoy has lost interest in the deal, said the partner in the consortium Georgi Tassev. I wouldn't be very precise if I said that the other partners (that is Garegin Gevondyan and me) were very much interested, he added. According to Mr. Tassev, however, both of them will also withdraw from the deal if a decision is made for selling the holding in parts. A check of the BANKER weekly showed as well that the two other participants - Tobacco Capital Partners AD and Consortium Rossbulgartabac AD - are still operating. Two interesting changes for the favourite bidder from the previous procedure were entered in August. Deutsche Bank became the sole owner of Tobacco Capital Partners by a decision of March 26, 2003. A few days prior that the company bought 100% of two other firms - Technical Assistance Company EOOD and Distribution Services Company EOOD. The two of them were registered in March 2003 and their sole owners are Bisser Parvoulov and Hristo Pamoukchiev (directors of Zlaten Lev Holding and the firms connected with it). Despite the changes, neither the owners of Tobacco Capital Partners, nor those of its subsidiaries have made any personnel changes in the managerial bodies. No changes have been made in the Consortium Rossbulgartabac AD either, whose Executive Director is Genadiy Kovalyov. The company, owned by the Moscow-based bank Regional Perspective (90%) and Vneshtradeexport, reported only BGN2,000 in expenses for 2002. There is no information about the current state of the fourt candidate - the Vienna-registered Tobacco Holding.

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