Банкеръ Weekly



The main news expected by all interested in Bulgartabac Holding's sale and, therefore, in the privatisation of the entire tobacco industry in Bulgaria, has not been broken yet, despite recent promisses by responsible persons. The press office of the Privatisation Agency (PA) announced that the panel of experts drafting a strategy on Bulgartabac's divestment, headed by PA's Executive Director Levon Hampartsoumian, continues its work. No wonder, however, if the general meeting of shareholders ultimately takes decisions that may slightly differ from those, proposed by the company's Board of Directors (BoD). One of the options is to increase the capital in favour of an investor. But the Public Offering of Securities Act does not allow issuance of shares on condition they would be purchased by a certain individual. Of course, there is a way to get round these legal provisions. For example, the State represented by the Ministry of Economy might register securities in favour of the new majority owner of the domestic tobacco industry. All this is only a hypothesis but its absolutely workable.
Which are Bulgartabac Holding's main assets? Not a few would point to the majority packages which the company holds in the tobacco factories in Blagoevgrad and Sofia. The right answer, however, is quite surprising. According to the records intended for the holding's genereal meeting, scheduled for July 26, 2001, the Institute of Tobacco and Tobacco Products (located in a village near Plovdiv) is evaluated at almost 50% of Bulgartabac's assets. That is so because Bulgartabac Holding's BoD will propose to the shareholders to vote for a decrease of its capital by half and to write off the Institute appraised at BGL3,665,000 (the holding has issued a total of 7,367,224 shares of BGL1 par) from the company's assets. In addition, 1,000 shares of the Bank Consolidation Company, evaluated at BGL1 par, will be deducted from the assets of the tobacco monopoly.
The decrease of the tobacco company's capital will be pursuant to Art. 203 of the Commercial Code, passed in the end of 2000. Its provisions allow concurrent invalidation and issuance of new shares. The interesting fact here is that the shareholders will vote both for a decrease and an increase of Bulgartabac's capital, and that by the same amount, BGL3,666,000.
The new shares will be issued at the expense of accumulated reserves.
The described aerobatics could be accepted as normal accounting practice if an entirely state-owned enterprise was concerned. But in this case the Ministry of Economy manages 92.82% of the holding's shares, while the balance of 7.16% were acquired by its head office employees through mass privatisation vouchers.
A considerable part of the shares are already in the hands of foreign portfolio investors and will be looted if the State's representative at the general meeting approves the proposal of the tobacco holding's BoD. In that case, the company in which they hold shares, will disintegrate with its assets devaluated by half, at that for nothing at all. Thus, the interests of the shareholders will be injured by the State.
The figures, announced by the holding's management, show that the sales of Bulgarian cigarettes on international markets are still at the low 1999 level. Strange as it may seem, the Talibans in Afghanistan are the most ardent fans of Bulgarian tobacco. Exports to that country have doubled to 1,479 tons annually. For comparison, only 131 tons were marketed in Russia, vs 2,761 tons in 1998. Mongolia is the second most important export destination of Bulgarian tobacco. Tadzhikistan, Turkmenistan, Uzbekistan, Kazakhstan, and Kirghizstan, follow in the row.

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