Last major privatization in automotive, new entries in pharma and FMCG (Deals of the Year)

Automotive Industry
A noteworthy deal in the automotive industry was the sale of Automobile Craiova to the European division of the American company, Ford. The Romanian carmaker went for EUR 57 million, small change compared with the Petrom or BCR privatizations. What makes this deal so important are the post-privatization obligations assumed by the buyer, intensely negotiated, and which would mean the rebirth of the Craiova plant and also of the city. Ford agreed to maintain the present activity at the factory for four more years and all of the 3,900 current employees. Also, the American investor has to produce no fewer than 300,000 cars by the end of 2012. Ford could be fined $27.5 million if the company's activity is changed or the number of employees drops below 500.
In mid-September the European Commission started an investigation into possible state aid to the US carmaker, and resulting breaches against European directives on competition. Competition Commissioner Neelie Kroes said the Romanian government had endorsed a special law for selling the company, writing off the plant's debts, both to the state and from contracts of former owner, Daewoo.
According to the privatization contract, AVAS has to find a final solution to the problem of the EUR 750 million historical debt coming from the revoked state aid. All debts are to be paid to the Romanian Fiscal Authority by the factory from Craiova. This was just one weak point of a deal that has thrown up a lot of problems which have yet to be solved. “It looks like the law stipulates the annulment of all debts of the Romanian carmaker and a guarantee regarding the payment of all debts to other branches of the Daewoo factory,” said the Competition Commissioner. The final deadline to clarify the deal is the end of January 2008, but as Sebastian Vladescu, former president of the privatization commission, said, “Ford is willing to wait only until spring of next year for a solution in the dispute with the EC.”

Distribution takes center stage in pharmaceuticals
The pharmaceutical sector registered important deals this year only in the distribution area. More exactly, 96 percent of distribution company Pharmafarm was bought by Armedica Trading, a company member of the Richter Gedeon group. The total value of the transaction reached approximately EUR 13 million. The deal is now being reviewed by the Romanian Competition Council.
But other important deals are on the way. Local drug producer LaborMed Pharma is for sale, according to media reports. The company is evaluated at more that EUR 120 million. Currently there are around eight players from the pharmaceutical industry interested in acquiring the asset. Names such as Shreya Lifesciences, Lupin and Dr. Reddy's Laboratories are on the list of possible buyers. Investment funds such as GED Capital and Global Finance have also expressed their interest in LaborMed Pharma. The Romanian company recently finalized a EUR 13 million investment in a production unit with a capacity of 1.5 million drug doses per year.
Another company that will be up for sales at the beginning of 2008 is Antibiotice Iasi. State officials say there are 22 companies that are interested in the penicillin producer: seven drug producers, 12 investment funds and three drug distributors. Analysts say the state could cash up to EUR 300 million from selling 53 percent of Antibiotice.

FMCG gets sweet deal
The food industry got sweeter in June this year when Cadbury Schweppes, controlled by Vantas International, also the major shareholder in confectionery company Kandia-Excelent, acquired 2.4 percent of Kandia's stake for EUR 2.4 million. The deal followed a EUR 7.1 million compulsory public offering. Cadbury Schweppes group purchased 93.2 percent of the company's shares in June, following a transaction estimated at EUR 100 million and assisted by Vantas International fund. The former shareholders of Kandia were Axis Investments and Meinl Bank. Kandia-Excelent has a factory in Bucharest with around 850 employees, and forecasts sales of EUR 50 million for 2007.

Dana Ciuraru

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