Syndicates Go for Strike against Bulgarian Cigarette Maker Sale

Industry | August 30, 2011, Tuesday // 20:42|  views

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Bulgaria's tobacco industry syndicates have decided to stage on Friday their protest rally against the sale of state-owned cigarette-maker Bulgartabac to Russian-owned bank VTB, the sole bidder for the company's privatization.

The rally will take place before the building of the Privatization and Post-privatization Control Agency, Hristo Yaprakov, a unionist from the Podkrepa Labor Confederation, told BNR Tuesday.

The syndicates reacted strongly after on Monday it became clear that BT Invest, an Austrian-registered firm owned by the Moscow-based bank VTB – the only entity to make it to the final stage of the privatization tender – has offered a price of EUR 100.1 M, or EUR 100 000 above the minimum asking price set by the Privatization and Post-privatization Control Agency.

The unions made the decision for the protest rally after a meeting late Tuesday.

"Our demands are the same old demands – termination of the privatization procedure. The investor criteria set in the procedure determined the outcome – having only one bidder at the end. This is not the right way to privatize Bulgartabac Holding," Yaprakov stated.

VTB-owned BT Invest's offer of EUR 100.1 M for the purchase of 5 881 380 shares, which are 79.83% of Bulgartabac's capital, is EUR 100 000 higher than the minimum required price of EUR 100 M set by the Bulgarian government.

The Russian-owned bidder – which was the only company that reached the final stage of the privatization procedure after British American Tobacco and Austria-based CB Family Office Service dumped the sale earlier in August – has also pledged in its offer that it will be buying a minimum amount of 5000 metric tons of Bulgarian-produced tobacco in the first five years after the sale. The amount in question is about 15% of Bulgaria's 2010 tobacco production.

It has also promised to invest in Bulgartabac BGN 2 M in the first year of ownership of the cigarette-maker and BGN 5 M in the second year.

At present, Bulgaria's former cigarette monopoly Bulgartabac has a market share of 34% in the country. 

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 and a processing factory in Yasen near Pleven, as well as a number of commercial brands. 

The Bulgarian government has set a goal of raising BGN 450 M from privatization before the end of 2011 but has raised only about BGN 13 M so far, making it likely that the government could opt for the sale of Bulgartabac even at a price slightly above the asking one.

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Tags: BAT, bank, Russia, financial investors, Philip Morris, KT&G, КТ&G, Korea, stock exchange, Bulgaria, Bulgaria, Bulgartabac, Bulgartabac Holding, cigarette-maker, cigarettes, privatization, Citigroup, Citigroup Global Markets Ltd., Economy Ministry, JT International, JTI, Japan, tobacco, strategic, binding offers, cigarette producer, King's Tobacco, CB Family Office Service, BT Invest, Graz, Austria, Austria, Blagoevgrad, sofia, Privatization Agency, Privatization and post-Privatization Control Agency, Podkrepa, syndicates, trade unions, protest


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