Bulgaria Signs Contract to Sell Bulgartabak to Russia’s VTB

Bulgaria signed a contract with a unit of Russia’s second-largest bank OAO VTB to sell a majority stake in Bulgartabak Holding (57B), ending a fourth effort in 12 years to sell the biggest state-owned tobacco maker.

The buyer of the 80 percent stake for 100.1 million euros ($136.6 million), Austrian-registered BT Invest GmbH, must continue producing tobacco and cigarettes and avoid insolvency during the next 10 years, the asset-selling agency in Sofia said in an e-mail today, citing the contract. VTB was the sole bidder in the tender after British American Tobacco Plc (BATS), Europe’s largest cigarette maker, pulled out.

This is Bulgaria’s biggest sale of state assets since the government of Prime Minister Boiko Borissov took office in 2009. The European Union’s poorest country by per-capita gross domestic product needs to raise cash to narrow its budget deficit and meet increasing social benefits payments ahead of October presidential and local elections.

“This was the longest and most condemned privatization in Bulgaria’s history, which cost the jobs of several ministers because of political opposition,” Nikolai Vassilev, the chief executive officer of Expat Capital investment company in Sofia, said by phone today. “I’m glad this government had the will to close the deal.”

Vassilev served as economy minister between 2001 and 2003 in the Cabinet of Simeon Saxe-Coburg Gotha and resigned following a failed attempt to sell Bulgartabak, he said. His successor Lidia Shuleva, was also forced to quit in 2005 after British American Tobacco dropped a 200 million-euro offer for Bulgartabak’s three biggest plants because the bid was challenged by opposition parties and Saxe-Coburg Gotha’s coalition partners.

VTB committed to keeping its stake in the tobacco company for the next five years and maintain the number of employees at the current level of 2,400 people over the next three years, the agency said.

BT Invest offered to invest an additional 2 million lev ($1.39 million) in the first year of operation and a further 5 million lev in the second year, the state-asset company said in an e-mail. It also committed to buying 5,000 tons a year of locally grown tobacco over the next five years.

Bulgartabak controls 30 percent of the domestic market with its six units, including four cigarette makers and a trading division. The company had net income of 34.1 million lev in the first six months of this year as revenue rose 78 percent and exports grew 30 percent, the Sofia-based company said on July 26.

By Elizabeth Konstantinova
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