Investment opportunity in tobacco industry in Bulgaria

I would like to draw your attention to a transaction which might be of interest for your clients or investors in tobacco business.

Bulgarian government is to start the privatisation of controlling stake (80%) in Bulgartabac Holding , Bulgaria’s state-owned tobacco and cigarette producer. It is a well-known producer of tobaccos and cigarettes in Europe and the Middle East.

Bulgartabac currently controls the largest cigarette manufacturing factories Blagoevgrad BT and Sofia BT and a tobacco processing company.

BTH currently controls about 37% of the Bulgarian cigarette market compared with 95% 5 years ago. However, the decline in market share has stopped for the past 2 quarters. Compared to 5 years ago BTH is more of an exporter – about 78% of the combined sales of Sofia BT and Blagoevgrad BT sales came from export markets in 2010 – mostly Middle East, Africa and Europe.

The privatisation is being advised by Citibank and the selling entity is the Bulgarian Privatisation Agency. The selection of method of privatisation is forthcoming any day – it is likely to be either tender or auction.

Transacta has significant experience with Bulgartabac. In 2004-2005 we were subcontractors to Morgan Stanley in the sales process which culminated with a BAT offer which valued 100% of BTH for EUR 200 million. For political reasons the deal fell through. We know the business well and have the capacity to handle the advisory work linked to it – from a full scope mandate – financial and tax due diligence, valuation, assistance in bid preparation, negotiations support, deal structuring and closure, to due diligence and/or valuation only.

Some metrics Bulgartabac Holding (summing) in the attached file.

Adjusted 2010 EBITDA is likely to be higher as there are some fees paid by the subsidiaries to the holding company which would be non-existent in a scenario of private ownership.

If you believe this investment opportunity is of interest for your client we could provide further details about the timing and the process.

Best regards