THE Government on Monday named Tobacco Capital Partners, the consortium owned by Deutsche Bank, as the buyer of Bulgartabac Holding.
Announcing the decision after a special Cabinet meeting, Deputy Prime Minister and Economy Minister Nikolai Vassilev said that the privatisation contract would be signed within 30 days of the date of Parliament's decision.
Within 20 days of the decision, the winner must submit to the Privatisation Agency (PA) a declaration on the origin of the money used in the deal.
The Cabinet decision determined the minimum acceptable terms of the privatisation contract, which could only be improved, Vassilev said. The prospective buyer must pay at least 110 million euro and pay off the 38.5 million euro debts of Bulgartabac Holding and its subsidiaries to the state and the Tobacco State Fund.
The decision sets the amounts of Bulgarian tobacco the buyer must purchase by the end of 2007. The amount agreed by Bulgartabac Holding must be purchased this year. The buyer must purchase 40 000 tons of tobacco in 2004; 42 000 tons in 2005; 44 000 tons in 2006; and 62 000 tons in 2007. The buyer will be liable for damages of two euro a kilogram of tobacco not purchased as agreed.
The prospective buyer pledges to invest 71. 175 milion euro and create 6000 jobs in Bulgartabac Holding in the next five years.
If the buyer fails to meet the terms of the contract, it may be cancelled, in which case the buyer must pay 80 million euro in damages. Also, the transaction may be invalidated if the buyer systematically fails to purchase more than 20 per cent of the agreed amounts of tobacco.
On Tuesday, it was announced that the parliamentary groups of the ruling National Movement Simeon II (NMSII) and its coalition partner Movement for Rights and Freedoms (MRF) had unanimously backed the Cabinet decision to choose Tobacco Capital Partners as the preferred buyer. The announcement came from NMSII floor leader Plamen Panayotov.
Representatives of Deutsche Bank arrived Tuesday in Sofia and met the management of the PA. According to Mark Donegan, top executive at the bank, they expect to sign as soon as possible the privatisation contract for Bulgartabac.
The schedule of negotiations with Tobacco Capital Partners, was discussed during the meeting.
However, the Deutsche Bank representatives stated that they expect to see the decision of the Constitutional Court on the changes to the Privatisation Act, which could influence the outcome of the deal. Donegan said that Bulgaria's judiciary is independent and Deutsche Bank has always taken into consideration its decisions.
Donegan called on the politicians to forget their political prejudices and think about Bulgaria's interests. He underlined that an eventual failure of the deal would reflect negatively on the flow of foreign investments in Bulgaria. He warned that the company would withdraw from Bulgaria in case of a delay.
Taking the challenge to reason the cabinet's decision, Prime Minister Simeon Saxe-Coburg said that the deal was transparent and Bulgaria would make a grave mistake if the deal fails.
The Cabinet decision on Monday was preceded by other developments in Bulgartabac's privatisation.
The Consortium Metatabac did not confirm its offer for Bulgartabac and the PA submitted the offers of the other three potential buyers to the Ministry of Economy on Monday.
Consortium Metatabac, in which businessman Michael Chorny, expelled from Bulgaria in 2000 for national security considerations, is a shareholder, did not submit the 2.5 million euro deposit requested by the PA.
Metatabac representative Georgi Tassev told a news conference on Monday that by a decision of the Supreme Administrative Court, Consortium Metatabac was disqualified and Tobacco Capital Partners not admitted to competitive bidding. Tassev cited a ruling of the Supreme Administrative Court according to which only Austria's Tobacco Holding and Russia's Rossbulgartabac could take part in the tender for Bulgartabac.
According to Tassev, the PA must comply with the ruling of the Supreme Administrative Court because the amendments to the Privatisation Act recently approved by Parliament did not include provisions superseding enacted rulings of the Supreme Administrative Court and therefore the deal should be concluded according to the old rules. That was why Metatabac has not confirmed its offer and had not submitted the deposit. Tassev said that Consortium Metatabac would comply with the ruling of the Supreme Administrative Court, as the PA should, too.
The deadline for confirming the offers for Bulgartabac Holding and extending their term (until April 20) expired on March 10.
With the exception of Metatabac, the other three potential buyers - Rossbulgartabac, Tobacco Capital Partners and Tobacco Holding confirmed and extended the validity of their offers.
The Cabinet resolution on the selection of the future buyer is subject to approval by the National Assembly, allowing the Privatisation Agency to open egotiations with the selected candidate. Finally, the privatisation contract is approved by the Agency's Supervisory Board and the Council of Ministers.
Last August the PA chose Tobacco Capital Partners as winner of the tender for the privatisation of Bulgartabac Holding. However the procedure was appealed in Court by the other participants in the tender. At the end of last year a five-member panel of the Supreme Administrative Court disqualified Tobacco Capital Partners and ruled that the PA should ask for an improvement of the offers.
Subsequently Parliament passed amendments to the Privatisation Act introducing a relaxed procedure for the privatisation of enterprises of key importance for national security, including Bulgartabac Holding. Their enactment was delayed by a presidential veto, which was overridden by the National Assembly.
Last Friday, President Georgi Purvanov signed a petition to the Constitutional Court to establish the unconstitutionality of two provisions of the amendments to the Privatisation and Post-privatisation Control Act, approved on February 7.
Purvanov said that the obligation of Parliament to approve the buyer in a privatisation transaction, selected by the Government, was neither the exercise of legislative power nor of parliamentary oversight, the functions vested in Parliament by the constitution.
He said that another clause of the revisions restricted the right of citizens and legal entities to appeal against administrative acts that affected them.
The law establishes a special procedure for the privatisation of 15 commercial corporations, exempting all acts of all authorities involved in such privatisation procedures from judicial review and prosecutorial protestation.
"This runs counter to the constitution. European legislations admit exemption from judicial control solely in respect of acts of government related to force majeure: natural disasters, wars and other such," Purvanov said.
The opposition Bulgarian Socialist Party and United Democratic Forces (UtDF) also challenged the revisions to the Privatisation Act, by petitioning the Constitutional Court.
The key point in the UtDF's reasoning was that, "in its entirety, the law establishes a set of special, unconstitutional rules for the privatisation of a group of expressly envisioned enterprises," according to a statement by the Union of Democratic Forces, which dominates the UtDF.
The UtDF parliamentary group has requested the Constitutional Court to hold an open hearing of the case instituted through the UtDF petition. The right-wing coalition called for an early hearing and a prompt judgment to prevent the conclusion of transactions, which would, in their view, violate the constitution.
The special rules introduced by the amendments to the Privatisation Act apply to the Bulgarian Telecommunication Company, Bulgartabac Holding Group, the country's seven electricity distributors, and other companies.
Announcing the decision after a special Cabinet meeting, Deputy Prime Minister and Economy Minister Nikolai Vassilev said that the privatisation contract would be signed within 30 days of the date of Parliament's decision.
Within 20 days of the decision, the winner must submit to the Privatisation Agency (PA) a declaration on the origin of the money used in the deal.
The Cabinet decision determined the minimum acceptable terms of the privatisation contract, which could only be improved, Vassilev said. The prospective buyer must pay at least 110 million euro and pay off the 38.5 million euro debts of Bulgartabac Holding and its subsidiaries to the state and the Tobacco State Fund.
The decision sets the amounts of Bulgarian tobacco the buyer must purchase by the end of 2007. The amount agreed by Bulgartabac Holding must be purchased this year. The buyer must purchase 40 000 tons of tobacco in 2004; 42 000 tons in 2005; 44 000 tons in 2006; and 62 000 tons in 2007. The buyer will be liable for damages of two euro a kilogram of tobacco not purchased as agreed.
The prospective buyer pledges to invest 71. 175 milion euro and create 6000 jobs in Bulgartabac Holding in the next five years.
If the buyer fails to meet the terms of the contract, it may be cancelled, in which case the buyer must pay 80 million euro in damages. Also, the transaction may be invalidated if the buyer systematically fails to purchase more than 20 per cent of the agreed amounts of tobacco.
On Tuesday, it was announced that the parliamentary groups of the ruling National Movement Simeon II (NMSII) and its coalition partner Movement for Rights and Freedoms (MRF) had unanimously backed the Cabinet decision to choose Tobacco Capital Partners as the preferred buyer. The announcement came from NMSII floor leader Plamen Panayotov.
Representatives of Deutsche Bank arrived Tuesday in Sofia and met the management of the PA. According to Mark Donegan, top executive at the bank, they expect to sign as soon as possible the privatisation contract for Bulgartabac.
The schedule of negotiations with Tobacco Capital Partners, was discussed during the meeting.
However, the Deutsche Bank representatives stated that they expect to see the decision of the Constitutional Court on the changes to the Privatisation Act, which could influence the outcome of the deal. Donegan said that Bulgaria's judiciary is independent and Deutsche Bank has always taken into consideration its decisions.
Donegan called on the politicians to forget their political prejudices and think about Bulgaria's interests. He underlined that an eventual failure of the deal would reflect negatively on the flow of foreign investments in Bulgaria. He warned that the company would withdraw from Bulgaria in case of a delay.
Taking the challenge to reason the cabinet's decision, Prime Minister Simeon Saxe-Coburg said that the deal was transparent and Bulgaria would make a grave mistake if the deal fails.
The Cabinet decision on Monday was preceded by other developments in Bulgartabac's privatisation.
The Consortium Metatabac did not confirm its offer for Bulgartabac and the PA submitted the offers of the other three potential buyers to the Ministry of Economy on Monday.
Consortium Metatabac, in which businessman Michael Chorny, expelled from Bulgaria in 2000 for national security considerations, is a shareholder, did not submit the 2.5 million euro deposit requested by the PA.
Metatabac representative Georgi Tassev told a news conference on Monday that by a decision of the Supreme Administrative Court, Consortium Metatabac was disqualified and Tobacco Capital Partners not admitted to competitive bidding. Tassev cited a ruling of the Supreme Administrative Court according to which only Austria's Tobacco Holding and Russia's Rossbulgartabac could take part in the tender for Bulgartabac.
According to Tassev, the PA must comply with the ruling of the Supreme Administrative Court because the amendments to the Privatisation Act recently approved by Parliament did not include provisions superseding enacted rulings of the Supreme Administrative Court and therefore the deal should be concluded according to the old rules. That was why Metatabac has not confirmed its offer and had not submitted the deposit. Tassev said that Consortium Metatabac would comply with the ruling of the Supreme Administrative Court, as the PA should, too.
The deadline for confirming the offers for Bulgartabac Holding and extending their term (until April 20) expired on March 10.
With the exception of Metatabac, the other three potential buyers - Rossbulgartabac, Tobacco Capital Partners and Tobacco Holding confirmed and extended the validity of their offers.
The Cabinet resolution on the selection of the future buyer is subject to approval by the National Assembly, allowing the Privatisation Agency to open egotiations with the selected candidate. Finally, the privatisation contract is approved by the Agency's Supervisory Board and the Council of Ministers.
Last August the PA chose Tobacco Capital Partners as winner of the tender for the privatisation of Bulgartabac Holding. However the procedure was appealed in Court by the other participants in the tender. At the end of last year a five-member panel of the Supreme Administrative Court disqualified Tobacco Capital Partners and ruled that the PA should ask for an improvement of the offers.
Subsequently Parliament passed amendments to the Privatisation Act introducing a relaxed procedure for the privatisation of enterprises of key importance for national security, including Bulgartabac Holding. Their enactment was delayed by a presidential veto, which was overridden by the National Assembly.
Last Friday, President Georgi Purvanov signed a petition to the Constitutional Court to establish the unconstitutionality of two provisions of the amendments to the Privatisation and Post-privatisation Control Act, approved on February 7.
Purvanov said that the obligation of Parliament to approve the buyer in a privatisation transaction, selected by the Government, was neither the exercise of legislative power nor of parliamentary oversight, the functions vested in Parliament by the constitution.
He said that another clause of the revisions restricted the right of citizens and legal entities to appeal against administrative acts that affected them.
The law establishes a special procedure for the privatisation of 15 commercial corporations, exempting all acts of all authorities involved in such privatisation procedures from judicial review and prosecutorial protestation.
"This runs counter to the constitution. European legislations admit exemption from judicial control solely in respect of acts of government related to force majeure: natural disasters, wars and other such," Purvanov said.
The opposition Bulgarian Socialist Party and United Democratic Forces (UtDF) also challenged the revisions to the Privatisation Act, by petitioning the Constitutional Court.
The key point in the UtDF's reasoning was that, "in its entirety, the law establishes a set of special, unconstitutional rules for the privatisation of a group of expressly envisioned enterprises," according to a statement by the Union of Democratic Forces, which dominates the UtDF.
The UtDF parliamentary group has requested the Constitutional Court to hold an open hearing of the case instituted through the UtDF petition. The right-wing coalition called for an early hearing and a prompt judgment to prevent the conclusion of transactions, which would, in their view, violate the constitution.
The special rules introduced by the amendments to the Privatisation Act apply to the Bulgarian Telecommunication Company, Bulgartabac Holding Group, the country's seven electricity distributors, and other companies.
