Банкеръ Weekly



The strategy for the restructuring and sale of Bulgartabac is ready and is expected to be moved for discussion by the tripartite BSP, NMSII and MRF coalition, the holding's Executive Director Hristo Lachev said in the beginning of the week. The tobacco holding has already been an apple of discord between coalition partners in Bulgarian governments and has several economic and agriculture ministers have lost their position because of it. Currently, the situation is even more complex because not two but three parties will have to bless the way for the divestment of the tobacco branch. The last attempt at its privatisation was in the beginning of 2005, but the deal got into the trap of the two ruling parties' - NMSII and MRF - political ambitions.
The main point in the new strategy is the fact that in case of a lack of interest Bulgartabac Holding might remain state-owned and its privatisation at any cost won't be sought. For the time being, this seems to suit mostly the position of BSP, which is the biggest party in the ruling coalition. According the left-wing MP and BSP Deputy Chairman Dimiter Dubov, divestment at any cost would be the worst choice. He added he didn't expect Bulgartabac to be quickly privatized and there were also possibilities for the company to remain state-owned or that the state would keep most of its capital and sell out the remaining part. But as the strategy has not been approved yet Mr. Dubov said it was too early to speak about BSP's stance about it. The MRF shared the same position. An MP from the party explained it was still too early to discuss the holding's future. The decision about Bulgartabac will solely depend on the strategy. Last weekend MPs were expected to ask the holding's Executive Director Hristo Lachev to present information about the document.
A representative of the holding's managerial team said there was already some clarity about the initial price of the individual companies within Bulgartabac's structure, but it has not been made public yet because several foreign firms have show interest. The price will depend on the procedure for the holding's sale and if that will be done by a tender or through the stock exchange. According to the same source, not more than 500 people from the holding would be sacked. Their number could be much less because many of the enterprises have already completed their restructuring.
The possibilities for Bulgartabac's sale after its restructuring are still three, as pointed out by Minister of Economy and Energy Roumen Ovcharov back in the end of last year. The holding could be sold out as a whole enterprise, the companies within its structure could be put up for sale separately, or offered on the stock exchange. The non-operating enterprises are to be divested first, and some of the operating ones afterwards, by the year-end. According to the programme, they will be offered as whole enterprises and if there is no interest they will be liquidated and their assets sold out. Mr. Lachev spoke for the first time about the privatisation of the Plovdiv-based Yuriy Gagarin BT factory, pointing out that investors showed the biggest interest towards the enterrpise's printing house. The options are to try selling the company through a tender procedure, or through the exchange if it fails.
The public tobacco processing companies will be most probably offered on the Bulgarian Stock Exchange - Sofia, and the other non-public companies will be put up for sale through a tender. Most of the money that Bulgartabac Holding gets will be used to pay compensations to laid-off workers.
The factories which licences have been revoked - those in Assenovgrad, Pleven, Shoumen, Haskovo and Vidin - will be divested, too, but their buyers will use them for tobacco processing only. All equipment for production of cigarettes will be purchased by Bulgartabac Holding in order to prevent illegal production.
Consumption of cigarettes is expected to decrease by some 30% in end-April or May due to the huge price hike. That might result in a shrinkage of cigarettes' output and only two or three factories could remain on the market. At present, cigarettes are produced in Blagoevgrad, Sofia, Plovdiv, and Stara Zagora. According to Mr. Lachev, it is possible to introduce new kinds of cigarettes and packs, for instance non-standard 120-mm or 94-mm sizes, or packs of 10 or 17 pieces of cigarettes.

The Supervisory Board of Bulgartabac Holding gave a preliminary permission to the management Board of Haskovo-BT to open procedures for cancelling the company's liquidation. On January 20 the Management Board of Bulgartabac Holding also made a decision that the holding, being a major shareholder, should demand calling an extraordinary meeting of Hastovo-BT's shareholders. It will have to decide if to proceed with the company's liquidation. The general meeting should be held not later than March 20, 2006. Bulgartabac Holding owns 91.77% of Haskovo-BT's capital, 6.51% is in the hands of other juristic persons, and natural persons have 1.72 per cent. The company was BGN1.075MN in the red for the first nine months of 2005, twice down from the BGN2.385MN loss, reported for the same period of 2004. The company's equity capital is negative, amounting to minus BGN17.764MN in end-September 2005. The subject of activity includes purchase, industrial processing, preparation for export, and trade in tobacco. Production of tobacco products in the enterprise was stopped in 2005. Haskovo-BT's shares were last traded on April15, 2005 at BGN2.20/apiece.

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