[Intl-tobacco] Bids for Bids for Bulgarian cigarette makers due Sept 30

[Robert Weissman]

Reuters
Bids for Bulgarian cigarette makers due Sept 30
Monday July 19, 10:03 am ET


SOFIA, July 19 (Reuters) - Bidders vying to buy majority stakes in
Bulgaria's four
best state-run tobacco firms must present offers by the end of
September, the
companies' holding unit said on Monday.

The poor EU candidate country relaunched the long-delayed sale of Bulgartabak
earlier this month, putting four cigarette manufacturers on the auction
block in
two separate packages.

One package comprises 85 percent and 78 percent stakes, respectively, in
Bulgartabak's Blagoevgrad and Stara Zagora factories.

The other includes 78 percent stakes in its Sofia and Plovdiv mills. In an
advertisement in domestic and international newspapers, state-controlled
Bulgartabak Holding said bids for the firms were due by September 30.

The government has said it wants to earn at least the market
capitalisation of the
companies -- which totals 490 million levs ($311.9 million). The four factories
have a combined debt of 133 million levs.

The stakes of the companies that are not for sale are floated on Sofia's illiquid
bourse.

Analysts say investors will mostly see the factories, which all produced modest
profits last year, as a way to break into Bulgaria's tightly controlled cigarette
market, where Bulgartabak brands hold a 98 percent share.

Possible bidders include Britain's Gallaher (London:GLH.L - News) and Imperial
Tobacco (London:IMT.L - News), Altria Group's Philip Morris (NYSE:MO - News),
British American Tobacco (London:BATS.L - News), Korean KT&G
(KSE:033780.KS -
News), Japan Tobacco (Tokyo:2914.T - News) and French-Spanish Altadis
(Madrid:ALT.MC - News).

The two packages must go to different investors.

As part of the sale, which will end Bulgartabak's cigarette-making
monopoly and
liberalise prices ahead of EU entry expected in 2007, Bulgartabak
Holding will also
strip cigarette making licenses from another 12 ailing processing plants.

The sale is Bulgaria's third try to sell Bulgartabak. Two previous
attempts to sell
the company failed, mainly because industry majors only wanted its profitable
units.

In 2003, Bulgartabak sold roughly 25 billion cigarettes, or nearly half
a pack a
day for each of Bulgaria's eight million people. ($1=1.571 Leva)

Bulgaria's Tobacco Giant Sale Underway
2004-07-19
Bulgaria started the privatisation procedure of the country's tobacco giant
Bulgartabac by announcing the sale of two of the plant's pools.

The announcement for the sale was published in Financial Times, the Bulgarian
newspapers Dnevnik and Pari. It will also be published in the
International Herald
Tribune.

Bulgaria's tobacco monopoly has been offered for piecemeal sale to strategic
investors who will be able to bid for the four most profitable plants
grouped in
two pools.

Blagoevgrad BT and Stara Zagora BT has formed the one pool, and Sofia BT and
Plovdiv BT were offered in the other privatisation pool. The sale of
both pools is
part of the privatisation strategy of Bulgaria's tobacco monopoly
adopted last
October, which provides for a piecemeal sell-off of Bulgartabac's plants.

Bulgartabac Holding includes twelve processing and nine packaging and
filter-producing factories. It also runs five cigarette factories in
Russia and one
each in Ukraine, Romania and former Yugoslavia.

Potential bidders are invited to submit their offers by the end of
September. The
candidates are required to have at least five years of experience in the
sector of
cigarette production and to represent EUR 500 M in net sales revenue at minimum
over the last financial year.

The short-listed pool-buyers will become known by the end of November,
and the sale
is planned to be complete by the end of this year.

The privatisation deal consultant Morgan Stanley & Co. Ltd confirmed
that major
tobacco companies have shown interest in the sale, including British American
Tobacco (BAT), Philip Morris, Imperial Tobacco, Korean KT&G and British Gallaher.