Wednesday, 5 August 2009

Why Is Bulgaria Selling A Proifit Making Industry?

Why Is Bulgaria Selling A Proifit Making Industry?

I’m not quite sure why this major cigarette industry is being sold. If it makes a profit and is a viable business why sell? I know tobacco is a sensitive subject and usually put on a political tight rope, but cigarettes are a major source of income to the government in tax. Surely they should nationalise the company, raise the duty on the products and that’s more money for the government and another deterrent to smokers with raised prices. That’s what most countries do, but hard on smokers I know.

Bulgaria hopes to carry out the delayed sale of its dominant cigarette maker, Bulgartabak Holding BTHG.BB, by the end of the year, the energy and economy minister Traicho Traikov said on Monday.

This will be the fourth attempt by the country to dispose of the former tobacco monopoly, whose key assets are the cigarette mills Sofia BT SOFBT.BB and Blagoevgrad BT BLABT.BB.

"The best moment for the sale of the company was irretrievably missed and at present the company is losing its market share," Traikov told reporters. "But we still can have a positive effect from the sale," he said.

Traikov said there was investor interest and that a deal could be sealed by the end of the year.

He said the holding could be sold at auction with open bidding, and bidders would have to agree to certain commitments, including certain levels of local tobacco purchases.

Previous attempts to sell the company had failed due to political wrangling and, some analysts said, because vested interests were benefiting from cigarette smuggling and lucrative state-financed contracts with Bulgartabak.

British American Tobacco (BATS.L) offered 200 million euros ($284.9 million) for the two mills in 2005, but the deal was blocked by the ethnic Turkish MRF party, a junior coalition partner in the former Socialist-led government, and BAT withdrew its proposal.

The sale was also politically sensitive because many of the Balkan country's ethnic Turks, who make up about 10 percent of the population of 7.6 million, were tobacco growers. Now many of them have found alternative jobs.

Industry insiders say the holding was not likely to attract higher bids than BAT's, as competition has eaten into Bulgartabak's share since 2007, when the country joined the European Union and its liberalised market.

Bulgaria, where half of the adult population smokes, has also committed to ban smoking in all public places, including bars and restaurants as from next year. (Reporting by Tsvetelia Ilieva, editing by Will Waterman) ($1=.7019 Euro)
Image by boeke

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