[Intl-tobacco] Bulgarian tobacco selloff at risk

[robert weissman]

UPDATE 2-Bulgarian tobacco selloff at risk, gets only 1 bid - Reuters
October 29, 2004

By Tsvetelia Ilieva

(Adds comments, details, background)

SOFIA - The long-awaited selloff of Bulgaria's state-controlled tobacco
monopoly, Bulgartabak Holding BTHG.BB hit a major obstacle on Friday when
the firm received only one bid for the state holdings in its four best
cigarette factories.

As crowds of workers protested against layoffs planned at the company's
loss-making units, the leftist opposition called for a halt to the sale,
which the World Bank and the IMF say is crucial to the Balkan state's
economic future.

British American Tobacco BATS.L was the only bidder, offering to buy a
package comprising the majority state stakes in Bulgartabak's plants in
Sofia and Plovdiv. A second grouping of its Blagoevgrad and Stara Zagora
factories attracted no interest, Bulgartabak Executive Director Ilia
Kaloferov told a news conference.

He did not disclose details of the bid but said the firm's supervisory board
would meet and decide whether to call off the tender or proceed in another
fashion by the end of next week.

"We will have to decide how to proceed from here ... We will likely hold
talks with the other two short-listed bidders," he said, referring to
Imperial Tobacco IMT.L and Philip Morris MO.N , which did not submit offers
by the 1400 GMT deadline.

BAT declined to comment on the details of its offer.

"We're just going to have to wait and see what the vendor wants to do ...
The fact that we've made a bid is because we are interested," said BAT
spokesman David Betteridge.

Bulgartabak, whose brands have a 98 percent share of Bulgaria's lucrative
cigarette market, had planned to split its cigarette making monopoly into
the two production packages.

It stripped production licences from four of its other cigarette mills on
Friday and liquidated its fifth.


TENSIONS HIGH

Hundreds of workers from the factories facing layoffs protested on Friday --
and demonstrators scuffled briefly with police in Haskovo, a town near
Bulgaria's Turkish border, national radio BNR reported.

Most of Bulgaria's 10 percent Turkish minority work in the tobacco industry
and half of the eight million population smokes, making the deal the
country's most sensitive privatisation to date.

The government decided on the piecemeal approach after earlier bids to sell
Bulgartabak as a whole to industry majors -- and later a financial
consortium -- collapsed amidst challenges from leftist political groups and
other interests.

But seven years of delays may proven more costly than previously thought, as
approaching EU entry, planned for 2007, might not give investors enough time
to take advantage of the planned duopoly the deal offers.

"For Bulgartabak the time before entering the competitive EU market is too
short for investors to get their investments back," said Kaloferov.

But he said ongoing restructuring would continue, and that a parallel sale
of Bulgartabak's tobacco processors had attracted interest in 10 of the 12
plants on offer.

"I hope we can sell at least half of them," he said.