Bulgaria, Russia-backed buyer sign Bulgartabac deal

13th September 2011, Comments 0 comments

Bulgaria signed a deal for the privatisation of cigarette maker Bulgartabac, mainly by Russian interests via an Austria firm, the privatisation agency said on Tuesday.

The sale is to an Austria-registered company, majority owned by a unit of Russia's VTB bank.

"The privatisation agency and BT Invest GmbH, Austria, signed the contract for the privatisation of 79.83 percent of the capital of Bulgartabac," the statement said.

The buyer was due to transfer 20 percent of the price of 100.1 million euros ($136.4 million) during the day and to pay the remaining 80 percent before finalisation of the deal, which still depends on approval by Bulgaria's competition watchdog.

Under the terms of the contract, the buyer agrees to preserve the company's main activity and not allow its liquidation for 10 years as well as not to re-sell its stake in Bulgartabac for five years.

Other obligations also include the purchase of annual minimum quantities of home-grown tobacco and preservation of the number of workers.

Bulgaria's government had failed in several attempts to privatise the communist-era cigarette-making giant, which has about 34 percent of the home cigarette market.

Previous privatisation attempts were notably opposed by the Turkish minority MRF party, in Bulgaria's government between 2001-2009, as tobacco growing is a major occupation for the country's 10-percent Turkish population.

The privatisation to BT Invest however sparked huge controversy in Bulgaria, due to the shady ownership of the company which remained the sole bidder in the government tender.

Bulgarian press reports alleged that the Austria-registered company and its Russian owner were merely go-betweens and that controversial Bulgarian businessmen were the real new owners of Bulgartabac.

"The Bulgatabac deal is insultingly scandalous and insolent," Capital economic weekly commented, accusing authorities in Bulgaria for not requesting information about Bulgartabac's real buyer.

"The sale smells of conspiracy," 24 Chasa daily newspaper alleged in a recent editorial which evoked the "strange silence" of all institutions and notably the usually outspoken MRF party.

© 2011 AFP

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