Investors tread lightly on tobacco turf

Two weeks ago, on Oct. 19, the Privatization Ministry accepted the last bids for the sale of five of the country's seven state-owned tobacco companies.
But getting to this point took over five years, and it's still not sure whether the companies will be privatized by the end of the year, as previously planned, or whether the process will be delayed even further.
"That depends on the gentlemen on the other side and their offers," said Artur Wozniak of the Privatization Ministry's capital privatization department. "We're in no hurry."
Because of the sensitive nature of the industry, and the opposition by some in Parliament to its sale, most potential investors are keeping quiet, fearful of renewed criticism within the Sejm about selling off precious state assets.
"Naturally, there's always an opposition," said Jan Wierzbicki, director of Reemtsma International (Poland) Sp. z o.o. and vice director of the National Tobacco Industry Association. "The question is whether we are a democratic country or not, because we have a majority in Parliament. The Sejm has accepted it, the Senate has accepted it, and the President has accepted it. What more do you want."
Under the privatization plan, a 33% stake in the five tobacco companies located in Krakow, Lodz, Augustow, Poznan and Radom will be sold to foreign investors. As part of their proposals, bidders were also required to submit an investment package for the plant they are bidding on, as well as social packages for employees and farmers among other things. Once investment commitments are fulfilled, the partners will be able to increase their stake to 51%.
Among the bidders are companies like Philip Morris, Reemtsma, R.J. Reynolds and British American Tobacco, all of which have already begun schmoozing with the plants they will most likely be bidding for through licensing agreements and technical assistance.
The Privatization Ministry says these previous alliances will not influence the final choice of a buyer. "The ministry couldn't care less," Wierzbicki said. "They appreciate what we've done, but this is strictly a business decision."
As to what Reemtsma is offering for Wytwornia Wyrobow Tytoniowych in Poznan, Wierzbicki said: "You can't talk about a marriage which hasn't been consummated yet," adding that there is still some room for negotiations.