Банкеръ Weekly



The long-awaited procedure for the sale of the TEREM plants has finally begun. The sales announcement was published on March 25. State-owned stakes in companies included in the military equipment producing and repairing holding will be offered for sale. The state will keep up to 30% of its shares. Financiers with epaulettes calculated that revenues may go up to BGN200MN.
The TEREM privatisation strategy was developed in the middle of 2007 by a consortium between KPMG - Bulgaria and the Arsov, Nachev, Ganeva legal office. The Council of Ministers approved it last December.
The BANKER weekly was the first to inform several months ago that the plants were divided in two blocks of four enterprises. The first of them are defined as strategic and up to 66% of their capital will be offered for sale. This group includes: TEREM-KRZ Naval Arsenal Varna, TEREM Georgi Benkovski - Plovdiv, TEREM Khan Kroum - Targovishte, and TEREM Ivaylo - Veliko Turnovo. Strategic investors will be sought for them to guarantee that these companies will keep supplying products not only for the market but also for the needs of the Bulgarian army. Sellers hope to attract the big multinational companies operating in the military branch who will be able to keep the product list as well as expand it and open new markets for it.
For the other four companies: TEREM-LETETS - Sofia, TEREM-Ovech - Provadia, TEREM General Vladimir Zaimov - Bojurishte, and TEREM Tsar Samuil - Kostenets, the requirements to the applicants are lower and price will be a decisive factor for the selection of the winner. Again, the company's core business is required to be kept, but this time for a 3- to 5-year term. Up to 74% of their shares are expected to be offered for sale.
An independent two-phase competition will be announced for each enterprise. The first phase will be preparatory and aims at assessing and allowing the applicants to participate. In the second one those approved will compete to each other. Applications for participation in the sale of the first group of companies defined as strategic should be submitted to the TEREM records department in Sofia until June 12, 2008. The documents are available for sale by June 5. The deposit amounts to EUR500,000 or its lev equivalence. Offers for acquisition of stakes are prepared and submitted until the 40th business day expires following the day applicants allowed to the second phase are announced. Tender documents for the second group of companies can be bought by May 8 and submitted by May 15. Deposits amount to EUR250,000 or the equivalence in levs. Offers for acquisition of stakes are to be prepared and submitted until the 30th business day expires following the day applicants allowed to the second stage are announced.
Advantage will be given to applicants who have the same or similar business in NATO member states. They should be experienced in the production and repair of military equipment. Applicants are also required to have financial stability. Consortiums will be allowed to take part in the procedures, too.
Two powerful companies already emerged as the most perspective buyers. Eurocopter will certainly be among the candidates for the Plovdiv-based TEREM Georgi Benkovski. The company is already investing huge amounts in the construction of two centres for technical service and repair of EC 725 Cougar helicopters in the Plovdiv enterprise. One of the centres will carry out technical services and repair of the glider and the systems of the Cougars acquired by the Bulgarian army. The other will provide repair and preventive maintenance of the Makila 1A1 engines of the French Turbomeca. The construction of the two repair centres is going on fast. The first helicopter is expected to enter for plan diagnosis in March or April. Then the centres will get Eurocopter certificates.
Logically, another big player on the world arms market is expected to do his best to defend his investments in Bulgaria. The French Armaris which acquired the Varna-based Bulyard won the competition for delivery of four corvettes to the Bulgarian naval forces worth EUR750MN. In return to the delivery of four Gowind military ships to the naval forces, the French giant is planning to build a total of 16 vessels in the Bulgarian shipyard, most of them military ones, for the needs of various states. Thus Bulgaria will gain a new technology, a chance to do business in the sector and step on the world market with new products. Besides, 2,000 jobs will be opened. The deal was part of a frame agreement the Government signed in late 2007. However, the implementation was temporarily frozen since the Ministry run by Vesselin Bliznakov did not have the necessary funds to pay to the supplier. The TEREM privatisation revenues are expected to help the ministry revive this project.
Buyers will certainly be found for the rest of the companies, too. Russian arms companies, through western consortiums, will bid for pieces of TEREM. And this is logical considering that the Bulgarian arms production is based on Russian technologies.

TEREM Georgi Benkovski - Plovdiv is specialized in repair of aviation military equipment: MiG-21, MiG-23 and Su-25 aeroplanes and Mi-24 helicopters; another priority of their service is the repair of civil planes aggregates; it provides electrodeposit, too.
TEREM Letets - Sofia makes general overhaul of helicopters: Mi-24, Mi-17, Mi-14, Mi-8, Mi-2 and Ka-26, and of An-2 aeroplanes; of piston aviation engines: AS-62IR, AI-14R, M-137, M-14P, M-14B26, and M-462RF; of hydraulic, electromechanical, gyro-scopic, aneroid and mixed aviation devices, radio communication and navigation apparatuses.
TEREM-Ovech - Provadia is profiled in repair and modernisation of radio location stations, repair and modernisation of power aggregates and internal combustion engines, production of mechanic devices and instrumental equipment.
TEREM-Tsar Samuil - Kostenets produces industrial explosives, artillery and mine-thrower and rifle munitions of any calibre.
TEREM-KRZ Naval Arsenal - Varna executes complex repair, re-equipment and modernisation of ships of Bulgaria's and Russia's naval forces; produces ships for the needs of individuals and companies as well as ships for ancillary operations for the needs of Bulgaria's naval forces and for export.
TEREM-Ivaylo - Veliko Turnovo repairs portable firearm and equipment, artillery systems and complexes.
TEREM-Khan Kroum - Targovishte is specialized in major repair of tanks T-55, T-62, T-72, T-72M; armoured machines MT-LB, BMP and all types of MT-LB; modernizes tanks T-55 and T-72, armoured machines BTR - 60 PB, and produces MT-LB and their modifications.
TEREM General Vladimir Zaimov - Bojurishte repairs radio location, navigation and communication equipment, power aggregates; modernizes radio location equipment.

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