The only candidate to buy Bulgaria's state-owned cigarette producer Bulgartabac Holding, the Austria-registered firm BT Invest owned by Russia's second-biggest bank VTB, has offered a price of EUR 100.1 M

Bulgaria's Privatization and Post-privatization Control Agency opened Monday afternoon the only binding offer for the sale of Bulgartabac as the deadline expired.

VTB-owned BT Invest's offer of EUR 100.1 M for the purchase of 5 881 380 shares, which are 79.83% of Bulgartabac's capital, is EUR 100 000 higher than the minimum required price of EUR 100 M set by the Bulgarian government.

The Russian-owned bidder – which was the only company that reached the final stage of the privatization procedure after British American Tobacco and Austria-based CB Family Office Service dumped the sale earlier in August – has also pledged in its offer that it will be buying a minimum amount of 5000 metric tons of Bulgarian-produced tobacco in the first five years after the sale. The amount in question is about 15% of Bulgaria's 2010 tobacco production.

It has also promised to invest in Bulgartabac BGN 2 M in the first year of ownership of the cigarette-maker and BGN 5 M in the second year.

BT Invest's offers is now set to be reviewed by the privatization commission and the consultant on the deal – Citigroup. Bulgaria's authorities have vowed that if the offer does not meet the set requirements, the deal will not go through.

Russian media have reported that VTB is only acting on behalf of one of its clients which remains anonymous, and that it is going to sell Bulgartabac after it acquires it. The Bulgarian Privatization Agency has made it clear that it did not have additional information about bidder BT Invest other than what was announced publicly.

In the event that the consultant Citigroup and the privatization commission approve the sale, the deal is to be given a green light withing a week, and is then subject to approval from Bulgartabac's supervisory board.

At present, Bulgaria's former cigarette monopoly Bulgartabac has a market share of 34% in the country. 

The consultant for the Bulgartabac sale, Citigroup Global Markets Ltd, was picked by the Bulgarian government in February 2010.

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 and a processing factory in Yasen near Pleven, as well as a number of commercial brands. 

Bulgaria's governments have been toying with Bulgartabac's privatization for the past 13 years; a procedure was first started in 1998 by the Kostov Cabinet. A privatization strategy for the holding was approved by Parliament in 2002 but what followed were two unsuccessful attempts to complete its sale to Tobacco Capital Partners and British American Tobacco.

Until January 2007, the Russian government held a 99.9% stake in VTB. Thereupon, at the World Economic Forum in Davos, its CEO announced that the government would retain a 50% + 1 share and privatize the rest of company shares.

At present the Russian government owns 75.5% of the bank via the Federal Property Agency, which has been repeatedly laying claims to assets of tobacco monopoly Bulgartabac Holding during the previous procedures for its privatization.

Russia first laid claims to assets of tobacco monopoly Bulgartabac Holding during the second privatization procedure in 2002.

Back then Russia said it became owner of twelve Bulgartabac subsidiaries after WWII as part of reparations it received from Germany. Bulgaria was an ally of Germany during the war and Germans owned tobacco companies in Bulgaria then. In 1953 Moscow rented its Bulgarian tobacco assets to the communist cabinet in Sofia freely, but now says it has the right to claim assets in the company. In December 2002 Bulgaria officially responded to Russia's note, saying there are no legal grounds for Russia to claim Bulgartabac's property.

Three years later the issue popped up again, forcing British American Tobacco, which was selected preferred bidder for the main assets of Bulgartabac, to withdraw its EUR 200 M bid in frustration at the impasse caused by "the difficult political situation in the country".

British American Tobacco, the only top-notch investor among the companies, which were expected to bid for Bulgaria's majority stake in cigarette maker Bulgartabac in 2011, withdrew from the tender once again, on August 1.

The news came a week after Austria-based CB Family Office Service abandoned the sale, leaving Austria-registered BT Invest, behind which stands Russia's second-biggest bank VTB, 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.

The Bulgarian government has set a goal of raising BGN 450 M from privatization before the end of 2011 but has raised only about BGN 13 M so far, making it likely that the government could opt for the sale of Bulgartabac even at a price slightly above the asking one.

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