(PrivateEquityCentral.net) Boston-based Advent International confirmed today it intends to take legal action in the Bulgarian courts to invalidate the decision made last week by the Bulgarian Privatization Agency to kill the firm’s acquisition of state-owned Bulgarian Telecommunications Co. (BTC).
Advent had initialed a final contract with the Privatization Agency on March 22 whereby Advent agreed to purchase the Bulgarian government’s 65 per cent stake in BTC for E210m.
Earlier this month, the Privatization Agency reversed its decision 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 the majority 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.
Advent maintains the Privatization Agency’s rationale for rejecting the privatization is a smokescreen to cover political motivations. “The unanimous position against the deal, the reasons we see, are to our minds not legitimate,” Advent consultant William Aylward told Reuters. “There has to be a political deal.”
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 seven months ago.
“We were surprised and shocked to hear, first through the media, that the Privatization Agency had announced its decision last Wednesday to terminate talks with Advent and reopen negotiations with the Koc Group, whose original bid had been rejected by the Agency in September,” Joanna James, Advent’s managing director of Central European operations, said in a statement.
Most observers believe this favoritism 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 the Koc-led Turkish consortium reentered the picture in April, citing a procedural breach in the privatization process and requesting new talks with the government, it became apparent those political connections were about to pay off. “There is a political decision at the highest level that BTC should go to the second-ranked bidder, the Turkish consortium,” business daily Dnevnik reported last month.