[Intl-tobacco] Tobacco Privatization News: Serbia and Hungary

[Robert Weissman]

March 11, 2003
YUGOSLAVIA: INTERVIEW-Serb cigarette maker boosts output ahead of sale.
Beti Bilandzic
Reuters English News Service

NIS, Serbia and Montenegro, March 11 (Reuters) - A Serbian cigarette maker
expected to be sold to a top international tobacco group told Reuters on
Tuesday it aimed to boost output further in 2003 and to strengthen its
dominant market position.

"We made considerable investments in production and in marketing to obtain
our present market share of between 55-60 percent of cigarette sales in
Serbia," said General Manager Slavoljub Dragicevic of Duvanska Industrija
Nis (DIN), whose brands include Drina, Best and Classic.
"We also envisage further expansion into the remaining 40 percent with new
brands and improved quality," he said in an interview.

Serbia's privatisation agency is expected to offer DIN, the larger of the
republic's two tobacco plants, and the smaller Duvanska Industrija Vranje
(DIV) for sale in late March or early April in a public tender seen likely
to attract foreign bidders.

British American Tobacco , Philip Morris, Japan Tobacco International and
Imperial Tobacco Group have all expressed interest, attracted by a
potentially lucrative market in which billions of cigarettes are lit each
year.

"It is not the factory in Nis and the land it is on that are on sale here,
but the Serbian market," Dragicevic said in an interview at company
headquarters in the southern town of Nis.
Dragicevic said he did not have a preferred owner to take over from the
state. "It will be one of the big players because they are the only ones who
have enough money to pay."

PRIVATISATION PROCEEDS

Serbian Privatisation Minister Aleksandar Vlahovic has said he hopes to get
$1 billion from sales of state companies this year. The main facilities to
be put on sale are the two tobacco plants, a filling station chain and a
mobile phone operator.

Parliament last month adopted legislation paving the way for the sale of the
tobacco plants, stipulating that no single company can buy both.

The law also aims to protect the domestic tobacco -growing industry and to
crack down on smuggling that flourished during the turbulent rule of
ex-Yugoslav President Slobodan Milosevic.
Dragicevic said DIN, located in Nis around 220 kilometres south of the
capital Belgrade, was in good shape after investments of 30 million euros
($33.1 million) in the past two years.
"The company has no debts, no problems with the market, nor problems with
raw materials," he said. The group plans to spend a further 24 million euros
to upgrade its facilities this year.
DIN increased production by almost seven percent to 11.5 billion cigarettes
last year and plans to make nearly 12 billion in 2003, he said. It
introduced two new brands - low tar and nicotine versions of Best and
Classic - last year and expects to launch three more new brands this year.
It posted a profit of 574 million Yugoslav dinars ($9.9 million) in 2002,
twice as much as the previous year.

While saying privatisation was necessary, Dragicevic expressed unease about
the future for the plant's 2,400 workers.


Bulgaria Sells Tobacco Company Majority

SOFIA, Bulgaria (AP)--The government decided Monday to sell a majority stake
in the state-owned tobacco company for 110 million euros ($120 million)
to a
consortium controlled by Germany's Deutsche Bank.

The government decision needs approval from parliament. It was not
immediately announced when the legislators' vote would take place.

The state-owned Bulgartabac Holding will be sold to Sofia-based Tobacco
Capital Partners and Dutch-registered Clar Innis, which made a cash offer
for 80 percent of the company's assets.

The consortium already had won the auction for Bulgartabac last year, but
the closing of the deal was delayed because the Supreme Administrative Court
annulled the transaction after complaints were filed by the losing
bidders--two Russian and an Austrian consortiums.

Parliament since passed a government-sponsored law which took away the
court's powers to control 15 major key privatization deals, including the
one involving Bulgartabac, giving complete control over the sale of the
companies to the government and parliament.


AP-NY-03-10-03 1316EST