Bulgartabac Holding, Bulgaria’s state-run cigarette maker and vendor, has once again returned to the media limelight. The political decision to fast-track privatisation of the holding, taken at the Hisarya meeting of the trilateral ruling coalition, triggered a series of moves and statements from politicians, Bulgartabac managers, trade unions and workers.

Bent through as many viewpoints, the future of Bulgartabac has taken on very different shapes in the minds of the parties involved.

The fast-track sale, as initially presented in Hisarya on February 10, will see Bulgartabac and its four production facilities privatised within three months.

On February 13, the central management of Bulgartabac decided to wind down operations in its Plovdiv- and Stara Zagora-based plants. The company’s board of directors argued that it needed to streamline its overall financial performance, and the two plants were the prime candidates to be sold, having raked in losses for years. Hristo Lachev, CEO of Bulgartabac, said that the situation in which two profit-making subsidiaries, in Sofia and Blagoevgrad, had to offset the losses of its Plovdiv and Stara Zagora peers was no longer tenable. The move, however painful, was unavoidable, he said.

The plants in Plovdiv and Stara Zagora had 600 people on payroll and Bulgartabac earmarked 10 million leva for severance packages to soften their blow.

The decision to offload the two plants did not preclude either from resuming operations at a later date. Both cigarette making plants would retain their cigarette production licences, they just could not be allowed to produce proprietary Bulgartabac brands, the chairperson of Bulgartabac’s board of directors Korneliya Ninova said. The two plants now make cigarettes under six of the company’s brands.

“If all four factories continue operations, the holding might end 2008 at a loss and there would hardly be anything left to privatise,” Lachev said.

Workers and trade unions at Plovdiv- and Stara Zagora-based factories immediately reacted with mass protests, calls for immediate talks with Bulgartabac management and the economy minister.

On February 15, more than 100 workers waved “We want our job” and “Resignation for the Bulgartabac board of directors” slogans in a protest outside the Stara Zagora cigarette plant. The protest was just a dress rehearsal to an agreed mass worker demonstration outside the Bulgartabac headquarters and the Ministry of Economy and Energy, scheduled for February 19.

The warnings prompted an immediate reaction from the Economy and Energy Minister Petar Dimitrov. On the same day he met with the management and the trade unions of Stara Zagora and Plovdiv-based units to present three scenarios for the factories’ future.

Under the first scenario, the plants would be subject to fast – within three months – privatisation and would remain idle until sold. The plants would retain their cigarette production licence but would be precluded from producing proprietary Bulgartabac brands. Workers would get a severance package of one gross salary for each year with the factory, but no more than 20 gross salaries.

Under the second scenario, Bulgartabac would dispose of all four of its cigarette factories alongside the cigarette production licences and proprietorship over Bulgartabac-owned cigarette brands. Such a sale, however, would take nine months to prepare. Workers, once again, would be offered severance packages.

The third scenario would be a sale through the stock exchange, because that would ensure maximum transparency and the highest price for Bulgartabac assets.
At the same meeting, Plovdiv mayor Slavcho Atanassov asked the ministry to transfer its 80 per cent stake in the Plovdiv-based plant to the municipality. Both Dimitrov and the management of the Plovdiv-based plant discarded the idea as inexpedient and in violation of local legislation.

Originally, all three alternatives offered by Dimitrov were turned down by the trade unions, but two days later, on February 18, reports claimed that both plants agreed to the swift sale alternative.

The CEO of the Plovdiv cigarette factory Zlatomira Draganska said only this option offered an auspicious future for the factory. The fastest, most transparent and hardest to challenge way would be to be sold on the bourse, she said, as quoted by investor.bg.

Bulgartabac remains the biggest cigarette vendor in Bulgaria, with a 75 per cent market share in sales and production in 2007, but its dominant position was slowly eroding. In the first two months of this year, its market share was thought to have dropped to 70 per cent, under the continued assault of foreign brands, which have won ground after Bulgaria joined the EU in January 2007.

The state firm needed swift restructuring now that competition in the tobacco industry went up with the gradual waiver of the legislative protectionist clout the tobacco monopolist once had.