Bulgaria to Finalize Bulgartabac Privatization in 3 Weeks

The privatization deal for Bulgaria's state cigarette-maker Bulgartabac will be completed in 3 weeks, according to a senior government official.

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.

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.

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.

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.

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