Банкеръ Weekly



The Sofia-based pharmaceutical company Sopharma will acquire 50% of the capital of its former competitor on the Russian market - Bulgarian Rose-Sevtopolis of Kazanluk. The deal will be finalized in the beginning of next week. Then, according to Sopharma's lawyer Ventsislav Stoev, negotiations for the purchase of shares from some of the present owners of Bulgarian Rose-Sevtopolis will be completed. The deal became possible after on Tuesday (April 6) the Commission for Protection of Competition (CPC) allowed Sopharma AD to buy a majority stake (up to 95%) in the Kazanluk-based pharmaceuticals manufacturer. But four months earlier 93% of Bulgarian Rose-Sevtopolis were traded on the Stock Exchange at BGN0.01/share. The players on the capital market were: Telecomplect AD, the Deputy Chairman of the Supervisory Board of Cooperative Bank Nikolay Velkov, and the businessman Nikola Rachev. They bought out the shares which were until then in the hands of three offshore companies - Rosepath Enterprises (32.50%), Baygrove Ltd. (25%), and Timor Overseas (20.50%), and a 17.50% stake was held by the firm Pharmaexpress. Telecomplect AD is the most probable seller of its 49.5% package of shares. This option is supported by the fact that as of the beginning of 2003 Sopharma itself has been holding 1% of the Kazanluk-based enterprise. Shareholders (through Telecomplect MEBO AD) in the company for telecommunication equipment are Sopharma's Executive Director Ognyan Donev and the company's lawyer Ventsislav Stoev. Nikolay Velkov, who holds 20.4%, said in front of the BNAKER weekly he was not planning to sell his stake. It is hardly probable that Sopharma would be negotiating with the third player on the Stock Exchange Nikola Rachev, who holds 21% of the shares, transferred in November. The trading of Bulgarian Rose-Sevtopolis stocks on the capital market was aimed to oust the three offshore firms from the company, and the deal that followed to be as transparent as possible, Nikolay Velkov explained to a reporter of the BANKER weekly. The purchase of half of the Kazanluk-based enterprise on the part of Sopharma should financially strengthen it. The Sofia-based company has even started to apply the programme it worked out for stabilization of Bulgarian Rose-Sevtopolis. Nearly BGN6MN of its ZUNK debt has already been paid off by compensation instruments. The most recent instalment was remitted on March 23. The funds for that were provided by Sopharma in the form of a 3-year USD1.8MN loan signed by Bulgarian Rose-Sevtopolis on November 18, 2003. Bulgarian Rose-Sevtopolis AD on its part has launched negotiations with the State Receivables Agency for rescheduled payment of the debt's principal of USD2.9MN within nine years. The programme for financial rehabilitation projects also servicing of other public liabilities, accrued in the 1999-2002 period, as well as payment of the current tax and insurance liabilities. It is not a secret that Bulgarian Rose-Sevtopolis AD was in a grave financial situation, with an exceptionally low liquidity and negative profitability, and did not satisfy the criteria for an operating enterprise. The main reasons for that situation were the above-mentioned overdue liabilities to the State and hence, the impossibility to get bank credits. Financial resources were needed not only for repayment of its debts, but also for the introduction of the good manufacturing practice (GMP) without which its future production would be impossible. The situation was worsened also by its almost 10-year long argument with Sopharma for the rights over the trade marks of some of its products - Tempalgin, Broncholitin and Krasil. Sopharma was the ultimate winner. Anyhow, it has been the only one to place orders to the Kazanluk-based company in the last few months. Bulgarian Rose-Sevtopolis in fact began operations after signing on May 13, 2003 a contract with Sopharma for the production of the above-mentioned medicines. By the end of 2003 the Kazanluk-based enterprise received proceeds of BGN5.9MN (99% of the sales on the domestic market) from their sale. And its 2003 turnover totalled BGN7.3MN. In the words of Mr. Velkov, Sopharma will continue to guarantee in the future the operation and the markets of Bulgarian Rose-Sevtopolis. The CPC believes that the future concentration will increase the competitiveness of both companies without changing the structure of the market of medicines in Bulgaria. The purchase of Bulgarian Rose-Sevtopolis shares will enable the two companies to maintain the positions they have already gained on international markets. Sopharma AD has also prepared an investment programme for Bulgarian Rose-Sevtopolis, which includes modernization and expansion of manufacture. A new line for the production of rose oil, of shampoos and creams on its base, will be soon commissioned, and the workshop for extracts will be licensed. After that concentration Bulgarian Rose-Sevtopolis AD will remain a public company, Sopharma's lawyer Ventsislav Stoev assured. In end-September 2003 the Sofia-based company decided to merge into itself its subsidiaries Pharmachim Holding, the Scientific and Research Chemical and Pharmaceuticals Institute (NIHFI), Vramed and Unipharm. The latter holds 40% of Elpharma AD, which on its part owns 86.66% of Sopharma's shares. However, the new acquisition of the pharmaceutical company has not been included yet in these plans. According to the lawyer Stoev, it is yet to be decided if Bulgarian Rose-Sevtopolis should be transformed.

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