Belgrade, Aug 4, 2003 - A Serbian Privatisation Agency's tender commission in charge of selling Serbia's biggest tobacco company Duvanska Industrija Nis (DIN) has selected the world's largest cigarette maker Philip Morris Holland B.V. as the successful bidder in the company's tender privatisation.
Philip Morris offered €387 million for a 66.45 percent stake in DIN, €64.9 million in investments over the next five years and a social welfare programme of €59.1 million. Under the social programme, the new owner will be obliged to raise wages by ten percent over the next five years, set aside €5 million for housing projects and €2.5 million for training programmes. Also, Philip Morris will be required to purchase €39 million in shares distributed to DIN's workers and allow the employees a five percent share in an estimated annual profit of €1.03 million.
The buyer also offered an accompanying social welfare programme of €7.07 million, including health protection measures, additional training, as well as €5 million in contributions for the local community in Nis. Local self-government will also receive five percent of the privatisation revenues, or some €19 million.
The tender commission selected Croatia's Tvornica Duhana Rovinj (TDR) as runner-up in the tender. TDR offered €214 million for DIN's capital, €33.7 million in investments, €59.1 million for a basic social welfare programme and €48.9 million for an accompanying social programme.
BAT was the third-ranked bidder for DIN, offering €140 million for the stake, investments of €35 million and a social welfare programme of €59.1 million.
The Agency will start sell-off talks with Philip Morris shortly.
At the proposal of the Privatisation Agency, a tender commission charged with selling Serbia's second-largest tobacco company Duvanska Industrija Vranje (DIV) accepted an offer submitted by BAT. BAT, the sole bidder for DIV, will start direct negotiations with a commission to be appointed by Serbian Minister of Economy and Privatisation Aleksandar Vlahovic.
BAT offered €50 million for a 67.81 percent stake in DIV, a five-year investment programme of €24 million and a basic social welfare programme of €13.1 million. Five percent of the privatisation receipts will be allocated for the local self-government in Vranje.
If signed, sell-off agreements will bring in €605 million in foreign direct investment, said Serbian Minister of Finance and Economy Bozidar Djelic, also member of the two tender commissions. The move, Djelic went on to say, will help boost Serbia's budget and send a strong signal to foreign investors.
According to Djelic, the arrival of two cigarette majors is also a signal that international business and political circles believe in Serbia's stability and in its future. The two sales will also allow Serbia to produce cigarettes instead of importing them, said Djelic, adding that Serbia also hopes to become a regional cigarette export center.
Philip Morris Holland B.V., a unit of Altria Group Inc., is the world's largest cigarette producer. Its leading cigarette brands include Marlboro, L&M, Parliament and Eve. In 2002, Altria Group reported $80.4 billion in net revenues, with cigarette sales accounting for $47 billion of the sum.
British American Tobacco Serbia is part of British American Tobacco PLC. BAT PLC manages 84 cigarette plants in 64 countries world-wide, with annual cigarette sales of 777 billion. In 2002, the group posted net revenues of €15.1 billion. Its top cigarette brands include Lucky Strike, Pall Mall, Dunhill, Rothmans, Lord and Kent.
DIN is Serbia's NO.1 cigarette producer, covering 54 percent on the local market. Last year, the company sold 11.3 billion cigarettes. Set up in 1930, DIN employs 2,493 workers. It boasts 12 cigarette brands, including Best and Classic. In late 2000, DIN launched a €30 million investment programme, expected to allow the company to boost annual production capacity from 12 billion to 14.5 billion cigarettes.
Serbia's second-largest cigarette maker DIV sold 1.6 billion cigarettes in 2002. The company was founded in 1885 and has the capacity to produce some 2.5 billion of cigarettes per year. It employs 568 workers. In 2001, DIV held a nine percent market share in Serbia with its 13 cigarette brands including Morava, Formula and Vikend.
