(PrivateEquityCentral.net) Boston-based private equity firm Advent International was restored as the buyer of state-owned Bulgarian Telecommunications Co (BTC) on Friday after the Bulgarian Supreme Administrative Court ruled in the firm’s favor and overturned the decision last month by the Bulgarian Privatisation Agency to block the sale.
In its ruling the court said Advent's program for investments was approved for a five-year period, whereas the Supervisory Board rejected the bid on the basis that the investments were concentrated in the fourth and fifth years.
“The important thing is that the court rejected all motives of the Supervisory Board,” Privatisation Agency spokeswoman Ani Ruscheva told Bloomberg in a telephone interview.
The court’s ruling is subject to appeal within 14 days to its extended panel, whose decision is final.
Advent had initialed a final contract with the Privatisation Agency in March whereby the firm agreed to purchase the Bulgarian government’s 65 per cent stake in BTC for E210m.
The Privatisation Agency reversed its decision in May on the grounds documentation on the deal was not complete. The Agency also cited its unhappiness with Advent’s insistence that existing Bulgarian telecom law remain unchanged in the future, Advent’s demand that it keep 65 per cent of BTC’s dividends from 2002, and the fact the deal allowed for BTC’s shares to be transferred to companies registered in offshore tax havens, which was not in line with the asset’s sell-off strategy.
Most observers believed the decision reflected political, not financial, imperatives. Many interested parties in Bulgaria had considered the final terms for the sale of BTC to Advent disappointingly low. The unions had vowed to oppose the staff layoffs that were a component of the deal.
But the key factor was the influence of the junior partner in Bulgaria’s governing coalition. Bulgaria’s Prime Minister Simeon Saxe-Coburg-Gotha is propped up in parliament by Ahmed Dogan’s Turk Movement for Rights and Freedoms, which represents Bulgaria’s ethnic Turkish minority.
Dogan’s influence is widely cited as responsible for the government’s abandoning the E110m sale, launched in March 2002, of its 65 per cent stake in tobacco monopoly Bulgartabak to a Deutsche Bank-led consortium.
When it made the decision to reject Advent last month, the Privatization Agency recommended restarting negotiations with the all-Turkish consortium between industrial conglomerate Koc Holding and state-owned landline monopoly Turk Telekom whose offer for BTC Advent beat in October last year.
The Turkish consortium had originally offered E185m for the 65 per cent stake in BTC but had envisaged fewer staff cuts than Advent.
Perhaps not coincidentally, Advent announced on Thursday it was boosting its offer for BTC to E280m, and said it was ready to settle for a 50 per cent dividend from BTC’s 2002 profit if chosen as buyer.