Rival cities battle over shares in Bulgarian trade fair company

Rival cities battle over shares in Bulgarian trade fair company
By Dimitar Koychev in Sofia August 5, 2016

The municipal council of Plovdiv has turned down a 20.63% stake in International Fair Plovdiv, the organiser of the most important trade forums in Bulgaria, blocking a deal that would have seen the government’s shares in the company split between Plovdiv and the Black Sea city of Varna.

Plovdiv’s municipal council has pointed out that the city gains nothing from the transfer of the larger 29% stake offered by the government to Varna, and the proposal caused bitterness among the population of Plovdiv, Bulgaria's second city. There is speculation that the shares are being offered to the two municipalities so that International Fair Plovdiv’s majority owner, businessman and former MP Georgi Gergov, can exchange a land plot in central Varna for the city’s holding in the trade fair company.

On July 27, the central government decided to transfer for free its minority 49.63% stake in the trade fair organiser. Plovdiv municipality was to get 20.63%, and Varna municipality 29%.

Varna’s municipal council has already accepted its donation of shares from the central government, Dnevnik daily reported on August 4. However, the cabinet’s decision contains a clause that the transfers can take place only if they are approved by both municipal councils and the privatisation agency.

The remaining stake in International Fair Plovdiv is controlled by Gergov, also a former lawmaker from the Bulgarian Socialist Party (BSP), currently in opposition. In addition, Gergov is the majority shareholder of a company which owns the land plot of a large unfinished construction project in the centre of Varna.

On August 2, the municipal council of Plovdiv decided not to accept the central government’s donation and refused to approve the text of an agreement with the cabinet. The council also urged that the central government keeps all its shares. Plovdiv mayor Ivan Totev said that the city would accept 49% of the company’s shares.

Varna mayor Ivan Portnih said that there is no link between the transfer of the fair shares and the unfinished real estate project, Dnevnik reported. The mayor said that Varna wants to develop its own expo centre and its shareholding in International Fair Plovdiv will give it access to experience and useful contacts.

Portnih has denied rumours that Varna and Gergov will swap the two assets, with the Black Sea city gaining control over the land plot in its centre and the businessman boosting his stake in International Fair Plovdiv.

On August 3, Varna municipal councillors were informed that International Fair Plovdiv has pledged all its assets as a security to two loans received from leading Bulgarian commercial bank UniCredit Bulbank. The loans were extended in 2010 and 2014 and amount to approximately €13mn and BGN19.6mn (€10mn) respectively.

There is some controversy about the way Gergov reached a majority stake in the company. More than 10 years ago, Plovdiv municipality and Gergov formed a joint company, Puldin Tourinvest, which held slightly less than half of the shares of International Fair Plovdiv. Initially, the municipality and the businessman held 75% and 25% of the new company respectively. However, after capital increases Gergov reached a 75% stake in exchange for transferring hotels. Gergov also achieved control of a majority stake in International Fair Plovdiv after buying shares held by small private shareholders.

Plovdiv municipal councillor Bozhidar Zdravkov from the Reformist Bloc was quoted by 24 chasa daily as saying, “The simple reason shows that when we had a partnership with Gergov, the municipality loses.” Spas Garnevski, a councillor from the ruling GERB party, called the joint company decision voted on 10 years ago “a shame”.

Situated on an area of 352,000 sqm, International Fair Plovdiv is one of the largest trade fair sites in SEE. The complex comprises 17 multifunctional pavilions. The total exhibition area is 159,100 sqm, including 64,500 sqm indoors. The fair also has a modern congress centre. Seven of the fair’s events have been approved by the Global Association of the Exhibition Industry (UFI).

The Bulgarian state has intended to dispose of its 49.63% stake in International Fair Plovdiv since as long ago as February 2013. The idea back then was to offer the stake on the Bulgarian Stock Exchange. The decision to sell the state’s shares was made after the government challenged unsuccessfully in court two capital increases, through which Gergov reached a 49% stake in the exhibition company.