BAT Dumps Bulgarian Cigarette Maker, Russia's BT Invest Sole Bidder

British American Tobacco was rumored to have bought documents just with the aim of collecting information and with no plans to bid in Bulgartabac tender. Photo by Sofia Photo Agency

British American Tobacco, the only top-notch investor among the companies, which were expected to bid for Bulgaria's majority stake in cigarette maker Bulgartabac, has withdrawn from the tender, officials said.

The company has sent an official letter, terminating its participation in the procedure due to "commercial and strategic reasons", the privatization agency announced on Monday.

The news comes a week after Austria-based CB Family Office Service abandoned the sale, leaving Austria-registered BT Invest, behind which stands Russia's second-biggest bank VTB, the only bidder for Bulgarian tobacco monopoly.

The move also confirms rumors, which said British American Tobacco bought documents for the tender just with the aim of collecting information and had no plans to bid.

Six years ago BAT was picked Bulgartabac buyer, but the procedure was terminated following pressure from the ethnic Turkish Movement for Rights and Freedoms, an ally of the government at that time, while the then Economy Minister Lidia Shuleva resigned.

Since then the market share of the holding shrank to about 37% due to strong competition by foreign brands.

British American Tobacco and Austria-registered BT Invest were the only two companies, which bought information memoranda before the deadline expired on July 25.

CB Family Office Service, the other Austria-based company, which was expected to submit a binding offer, did not purchase an information memorandum. Reports that the company had operational problems with the bank transfer of the money needed (BGN 20. 000) and may still take part in the tender have proved false.

Under the rules of the procedure the companies have to place a deposit and submit binding bids no later than August 29, while the winner should be selected in September.

Now that only one bidder has remained, it is not clear how the privatization agency is going to proceed.

Last month the head of Bulgaria's Corporate Commercial Bank, which is believed to finance the media group of mogul Irena Krasteva, has denied he is interested in the privatization of the country's state tobacco giant Bulgartabac Holding.

Tsvetan Vassilev is rumored to be linked to one of the two bidders for the state-owned cigarette-making giant, registered in Austria - CB Family Office Service or BT Invest.

Corporate Commercial Bank currently holds a 8.11% in Bulgartabac. The bank, which is believed to finance the media group of mogul Irena Krasteva, holds nearly half of the money of strategic state-owned companies.

A majority stake - 79,83% - in Bulgaria's state cigarette producer Bulgartabac Holding, whose management has been harshly criticized in recent years, was put on sale on April 26 after years of procrastination.

The long-delayed procedure was officially given the go-ahead by the agency for privatization and post-privatization control through an announcement in the State Gazette on May 10.

The consultant for the Bulgartabac sale, Citigroup Global Markets Ltd, was picked by the Bulgarian government in February 2010.

Two of the less profitable 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 currently owns the two larger and more consolidated factories in Sofia and Blagoevgrad as well as a number of commercial brands.

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