[Intl-tobacco] Bulgaria: Bulgartabac Fixes "Three Bidders"

[Robert Weissman]

Bulgartabac Tender Fixes "Three Bidders"
Novitne.com
2004-08-03
British American Tobacco (BAT), Philip Morris and Imperial Tobacco are the three
bidders attracted to the sale of Bulgaria's four most profitable cigarette plants,
part of the country's state tobacco monopoly Bulgartabac.

The names of the prospective buyers were expected to be revealed in a couple of
days, but a local radio broadcasted their names minutes after the deadline for the
purchase of sale documents elapsed on Monday.

A spokesperson for the tobacco monopoly declined to comment on the radio report,
reiterating the names of the bidders would be disclosed by the end of the week
after a review by the company's Supervisory Board.

Bulgartabac 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 form the first pool, and Sofia BT and Plovdiv BT
are 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.

The candidates are required to have at least five years of experience in the sector
of cigarette production and at least EUR 500 M in net sales revenue 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.


Reuters
Bulgartabak to shortlist bidders by end of week
Tuesday August 3, 10:13 am ET

SOFIA, Aug 3 (Reuters) - Bulgaria's state-owned tobacco firm Bulgartabak has
attracted interest from several companies vying for its four best cigarette
factories and will shortlist bidders by the end of the week, a spokeswoman said on
Tuesday.
Bulgartabak Holding, the parent company of the EU candidate country's monopoly
cigarette industry, is planning to sell the four plants by the end of the year.

Spokeswoman Petia Popova said Bulgartabak Holding was now studying initial
expressions of interest from prospective investors.

"The supervising council has decided to study the letters of intent as to whether
they meet the criteria, and by the end of the week, we will announce the companies
who have met the criteria," she said.

She would not name the number or names of the companies, but Bulgarian media,
citing unnamed sources, has reported they include British American Tobacco
(London:BATS.L - News), Imperial Tobacco (London:IMT.L - News) and Philip Morris
(NYSE:MO - News).

The companies were not immediately available for comment.

In one package of factories, Bulgartabak holding is selling 85 percent and 78
percent, respectively, in its Blagoevgrad and Stara Zagora sites. The second
package comprises 78 percent in its Sofia and Plovdiv mills.

Each pair must go to a different buyer.

After being shortlisted, potential investors will perform due diligence on the
factories. Final bids are due on Sept. 30 and the government aims to complete the
sale by the year end.

The government has said it wants to earn at least the market capitalisation of the
companies, which totals 490 million levs ($302.5 million) for 100 percent.

The four factories have a total combined debt of 133 million levs. The stakes of
the mills not for sale are listed on Bulgaria's illiquid stock exchange.

Analysts say investors may find the factories an attractive way to break into
Bulgaria's tightly controlled cigarette market, where Bulgartabak brands hold a 98
percent market share.

The sale will liberalise tobacco prices in the poor Balkan state of 8 million
people and strip cigarette-making licenses from 12 other mills owned by Bulgartabak
Holding which are not profitable.

The current sale is Bulgaria's third attempt to unload Bulgartabak. The first two
tries failed because foreign tobacco companies only wanted the firm's profit-making
units.

Bulgartabak sold roughly 25 billion cigarettes in 2003, or nearly half a pack a day
for every Bulgarian. ($1=1.620 Leva)