Bulgaria to Finalize Bulgartabac Privatization in 3 Weeks..

March 31, 2011 - The privatization deal for Bulgaria's state cigarette-maker Bulgartabac Holding,


Emil Karanikolov, head of Bulgaria's Agency for Privatization and Post-Privatization Control told the Bulgarian National Radio Wednesday that the deal is close to being finalized.

"We can't say that the main thing in this privatization deal will be the price. If that was the case, I think that Bulgartabac would have been privatized a long time ago," Karanikolov said, adding that the government has to balance between the price and the social commitments in order not to scare away the investors.

One of the provisions to be included in the future privatization deal currently mulled by the Bulgarian government is prevent the buyer from making a drastic number of layoffs at least in the first 2-3 years, and from renegotiating the labor conditions.

Karanikolov further said the government is considering including clauses for a deadline and volume of buying Bulgarian-grown tobacco.

Bulgaria's state cigarette maker Bulgartabac Holding, which is about to be privatized, completed 2010 with a net profit of BGN 20 M. Bulgartabac's 2010 profit is 16.5 times larger than it was in 2009. The consolidated income from cigarette sales grew 22% year-on-year. In 2010, 80% of the produce of Bulgartabac Holding was exported, compared with 53% in 2009, and only 31% in 2008. (Bulgaria - Bulgartabac 2010 profit 16.5 times larger than it was in 2009..)

In addition to its growing exports, the Bulgartabac Holding Group occupies 37% of the Bulgarian domestic tobacco market. 3.5% of Bulgartabac's income for 2010 came from the sales of tobacco leaves.

The Bulgartabac Holding Group features two cigarette plants – Blagoevgrad-BT and Sofia BT – and a tobacco processing plant, Pleven-BT.

About a dozen strategic and financial investors have declared interest in the privatization of Bulgaria's state cigarette producer Bulgartabac Holding, according to Economy Minister Traicho Traikov. (Bulgaria - about a dozen investors declared interest in the privatization of Bulgartabac Holding..)

Unofficial information reported in the Bulgarian media says that the bidders seeking to purchase Bulgartabac include companies from Bulgaria, Greece, and South Korea.

Bulgartabac, whose state management has been questionable in the recent years, is being put on the privatization table after its privatization has been mulled for years.

In January, Finance Minister Simeon Djankov reiterated earlier announcements that Bulgaria's government is determined to go ahead with the planned sale of the country's tobacco company, the biggest military plant and the minority stakes in electricity distributors.

The Economy Ministry revealed in January that the consultant Citibank has made preliminary inquiries with about 100 potential strategic and financial investors from around the world with respect to Bulgartabac's privatization in order to make sure that all "serious" investors that are not aware of the sale of the Bulgarian cigarette company.

According to the Ministry, there is a sufficient number of companies interested in the privatization of Bulgartabac because it is an attractive asset even in a time of crisis.

The consultant for the Bulgartabac sale, Citigroup Global Markets Ltd, was picked by the Bulgarian government in February 2010. (Bulgaria - Citigroup chosen as consultant for sale of Bulgartabac..)

The two less profitable cigarette plants of Bulgartabac holding – in the cities of Plovdiv and Stara Zagora – were sold in 2009 through the Sofia Stock Exchange – for BGN 31 M and BGN 18 M respectively; the holding still owns the two larger and more consolidated factories in Sofia and Blagoevgrad as well as a number of commercial brands. he holding still owns a number of commercial brands (The most popular domestic brand is Victory.) Two of the less profitable plants of Bulgartabac holding – in the cities of Plovdiv and Stara Zagora – were sold in 2009 on Sofia Stock Exchange. (Bulgaria - investor shows interest in state-owned cigarette monopoly Bulgartabac..)

Bulgaria’s Economy Minister Traicho Traikov has assured that a strategic investor is eyeing the privatization of the state-owned cigarette monopoly Bulgartabac. "There is a strategic investor for Bulgartabac and the bidding will be opened by the end of the autumn,” Traikov disclosed in an interview for Standard daily.

Bulgaria’s Privatization Agency hopes to complete the sale of state-owned cigarette monopoly Bulgartabac in 2010. The privatization procedure has reached a phase in which the state is preparing its sale together with the consultant it picked in February, Citigroup Global Markets Ltd. Citigroup was picked winner after bidding EUR 1.018 million and 1.6% of Bulgartabac’s selling price in case of sale.

Bulgartabac Holding currently operates two cigarette factories compared with nine in 2004 and its market share has shrank to some 40% from 60% a year earlier. The holding still owns a number of commercial brands (The most popular domestic brand is Victory.) Two of the less profitable plants of Bulgartabac holding – in the cities of Plovdiv and Stara Zagora – were sold in 2009 on Sofia Stock Exchange.

Bulgartabac sale is part of Bulgaria’s center-right government plans to angle for strategic investors for key majors, such as the tobacco monopoly and a few energy companies, in which the state owns higher than a 50% stake.

The decision was taken earlier this year after the cabinet was urged to sell on the stock exchange shares in companies, which are part of the Bulgarian Energy Holding, in a bid to put the local capital market back on track.

Reference: Bulgaria to Finalize Bulgartabac Privatization in 3 Weeks, Novinite.com (Sofia News Agency), 3/30/20

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