The Governing Board of Bulgaria's Privatization Agency approved Wednesday the sale of the State-owned tobacco monopoly Bulgartabac Holding to the Austria-registered BT Invest, owned by Russian state bank VTB.
On Monday, the buyer offered EUR 101.1 M for the Holding. The offer further binds the Austrian-registered company to buy 5 000 metric tons of Bulgarian tobacco a year in the next 5 years. The company has also slated BGN 7 M in its investment program for 2012 and 2013.
The contract with BT Invest is to be prepared by the Agency with a 15-day deadline, after which the document would be submitted for approval with the Governing Board. The latter has a 2-week deadline to announce its decision; then there are another 15 days for the two sides to sign the contract if the decision is favorable for the buyer.
The funds from the sale are to be deposited in the retirement system, not the state budget.
Bulgaria's tobacco industry syndicates have already announced a protest against the sale of Bulgartabac to VTB, scheduled to take place on Friday.
Immediately after it announced its decision to approve the sale, the Privatization Agency was vigorously slammed by key MPs from the opposition Bulgarian Socialist Party.
Dimcho Mihalevski, a Socialist MP and ex Deputy Regional Development Minister, said the cigarette-maker cost at least EUR 160 M, and described the deal as "scandalous."
Rumen Ovcharov, former Economy Minister in the Stanishev Cabinet, claimed that powerful economic circles in Bulgaria featuring the participation of Prime Minister Boyko Borisov were behind the privatization of cigarette maker Bulgartabac. He and former CEO of Bulgartabac, Soclialist MP Korneliya Ninova, stated that the Russian bank VTB was being used only as a cover by the "circles" in Bulgaria, and rejected the allegations that the Russian government was behind the purchase.
In its Tuesday edition, the Russian Vedomosti daily published an article, according to which the initiator of the Bulgartabac purchase is Atanas Bostandzhiev, who has been working in the bank's London office since May as strategic planner. He had been previously employed by Goldman Sachs and Merrill Lynch.
The sale of Bulgartabac to BT Invest has been defended energetically by the head of the Privatization Agency Emil Karanikolov who described the deal as favorable to Bulgaria.
BT Invest remained the only bidder for the Bulgarian tobacco monopoly after British American Tobacco and Austria-based CB Family Office Service dumped the sale.
British American Tobacco, the only top-notch investor among three companies, which were expected to bid for Bulgaria's majority stake in cigarette maker Bulgartabac, withdrew from the tender on August 1.
The news came a week after Austria-based CB Family Office Service abandoned the sale, leaving BT Invest the only bidder for Bulgarian tobacco monopoly.
The move also confirmed rumors, which said British American Tobacco bought documents for the tender just with the aim of collecting information and had no plans to bid.
Even though only one bidder remained, Bulgaria's privatization agency said it will not scrap the tender and expect the company to submit its binding bid.
As analysts expected, the offer is low and not profitable for the State. They have earlier advised the government to nix the bidding procedure and open a new tender on new terms, which will be Bulgaria's sixth attempt to sell its former tobacco monopoly.
Two of the less profitable plants of Bulgartabac holding - in the cities of Plovdiv and Stara Zagora - were sold in 2009 through the Sofia Stock Exchange - for BGN 31 M and BGN 18 M respectively.
The holding currently owns the two larger and more consolidated factories in Sofia and Blagoevgrad as well as a number of commercial brands.
When asked in the beginning of August to comment reports, according to which Ivan Savvidi, a Russian tycoon and member of parliament on the ticket of Putin's party, stands behind the sole and veiled in mystery bidder for Bulgaria's state-owned tobacco giant Bulgartabac, the Privatization Agency director Emil Karanikolov refused to elaborate on the speculations.
"The documents we have show that this is a major Russian financial group. I would not comment speculations and reports."
Russian authorities confirmed earlier this month that the country's second-biggest bank VTB plans the acquisition of a majority stake in Bulgartabac, but nobody in Bulgaria believes the bank is acting on its own behalf and on its own terms.
The real buyer behind the bid remains unknown and unnamed.
According to Russian media reports the bank will most probably resell the holding after winning the tender, which is the reason why it is not clear exactly who the bank represents.
The draft contract, however, includes a clause banning the resell in the next 5 years, the Privatization Agency informs. Insiders to the deal, however, are quoted by the Bulgarian Dnevnik daily saying the resell can easily happen through the sale of the BT Invest company.
Meanwhile, Bulgaria's tobacco industry syndicates announced they have decided to stage on Friday a protest rally against the sale of state-owned cigarette-maker Bulgartabac to Russian-owned bank VTB.