Банкеръ Weekly


Russians To Get Bulgartabac for EUR100.1M

The predecided tender for the sale of state shares in Bulgartabac holding officially ended. This is the fourth attempt for his privatisation since 1998 and the first one that formally had a submitted offer.
The only candidate - Austrian company BT Invest GmbH, won the tender for privatisation of 79.83% of the capital in Bulgartabac holding, as announced by the Agency for Privatisation and Post-Privatisation Control. The financial investor has offered a price of EUR100.1 million and vouched to make investments of EUR2 million, while in the second year - EUR5 million. The new owner will buy 5,000 tonnes of Bulgarian tobacco each year during the mandatory five year period, says the agency. The quantity amounts to about 15% of the tobacco production in the country.
The other three evaluation criteria related to the purchase of additional quantities of raw material remained uncovered as the company did not submit proposals. Since there is no clear view what the market in Europe can be, the company did not want to make commitments in this respect.
As it is known, behind BT Invest stands Russian bank VTB (Vneshtorgbank), in which the main shareholder with 75.5 percent share is the Russian state.
The deadline for signing the privatisation contract is 15 days from the date of the decision. In this period the buyer must submit a declaration for origin of the funds, which is a prerequisite for submission of the draft contract to the supervisory board. Then, the Supervisory Board of the Privatisation Agency has two weeks to sanction the deal.
As required by law, the total amount of privatisation of Bulgartabac will be directly transferred to the Silver Fund to support the pension system.
In late 2009, Minister of Economy and Energy Traycho Traykov told reporters that the basis on which they will begin thinking of selling Bulgartabac is a nine-digit amount in euro, i.e. at least EUR100 million. Then he added that it is a matter of what state the company will be at the time of the sale, other market conditions and investor's interest.
For everybody it is clear that the buyer will seek to resell the firm at a higher price and generate a decent profit. Executive Director of the Privatisation Agency Emil Karanikolov said he would leave a loophole in the contract for renegotiation of the prohibition five-year period in which the company cannot be resold.
The reasonable question that arises is why Sofia has to sell so cheap? One can doubt that either the seller lacks the relevant skills or plays with the buyer against certain benefits.
The truth is that the business of the tobacco holding company is declining. Its market share of over 80% fell to about 36% and tends to be shrinking even further. So this may be the last chance to find a buyer.

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