Syndicates Go for Strike against Bulgarian Cigarette Maker Sale

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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