The troubled VMZ Sopot factory, which is Bulgaria's largest defense industry plant and was once the pride of its military-industrial complex, will be put on the privatization table by the Borisov Cabinet.
The decision to start the privatization of VMZ Sopot is No. 1 on the agenda of the government's weekly meeting on Thursday.
The Bulgarian Cabinet is expected to approve for sale all 118 million shares of the military giant. The privatization is supposed to take place with a tender, rather than on the stock exchange. The potential buyers are supposed to offer detailed 3-year business plans for the factory outlining their investment intentions and their commitments to the number of jobs in the plant.
Last week Finance Minister Simeon Djankov reiterated earlier announcements that Bulgaria's government is determined to go ahead with the planned sale of the country's tobacco company, the biggest military plant and the minority stakes in electricity distributors.
The sale of Bulgartabac Holding AD, Sopot-based Vazovski Mashinostroitelni Zavodi or VMZ, and the minority stakes in the electricity distributors have been said to be a must-do task in 2011 due to the sorry performance of the state-owned companies.
"These companies are on the agenda of the Privatization Agency for 2011, " Simeon Djankov said. Bulgaria's government is most heavily criticized for its failure to rake in revenues into the budget by privatization, shows a survey, conducted among analysts, employers and trade unionists.
The VMZ Sopot plant employs 3 700 workers. It is located in the town of Sopot in central Bulgaria, which is the birthplace of Bulgarian writer and poet Ivan Vazov, after whom it was named. The plant was founded in 1936, and during the communist period was developed into a large-scale military industrial unit.
VMZ Sopot produces anti-tank guided and unguided missiles, aviation unguided missiles, artillery ammunition, fuses. It also manufactures civilian products – it makes diamond tools, abrasive discs and grinding wheels, gas cylinders, food industry equipment, and household appliances.
VMZ Sopot has been in a troubled financial condition in the last few years. In 2007, Bulgaria's Privatization Agency started to sell some of the plant's assets in order to cover part of its debts; some of its assets were also sold at the beginning of 2009.
Over the years, several governments failed to decide on a strategy to privatize VMZ Sopot, and the Privatization Agency is said to be expecting a solution from the GERB government and the new Parliament dominated by them.
In February 2010, VMZ Sopot, which is in deep financial troubled, fired workers who protested against delays of salaries.
In April, the head of Bulgarian Privatization Agency Nikolov announced that in 2010 the Bulgarian state planned to initiate the privatization of VMZ Sopot – a plan which has failed to materialize to date. In his words, the struggling arms giant will take a while to be privatized because the respective strategy for the it had to be approved by the Parliament first.
In May, Bulgarian authorities started investigating former managers of VMZ Sopot over suspected abuses that may have contributed to the dire financial situation of the plant. All information pertaining to the investigation is classified. The names of the former directors and senior managers of the military factory who are under investigation for abuses have not been revealed. VMZ Sopot currently has total debts amounting to about BGN 100 M.