Bulgaria Raises State Holding in Stock Exchange Before Majority Stake Sale

Bulgaria raised the state’s stake in the Balkan country’s stock exchange as it prepares to sell its majority to an industry investor and offer the rest to the public, said Ivan Takev, the bourse’s executive director.

The government bought 715,000 shares at 1 lev apiece, raising its stake 6 percent to 50 percent plus one share, Takev said in an interview in Sofia yesterday. The move guarantees the government will have control over the sale, probably next year.

Since 2008, the stock exchange has traded on the Deutsche Boerse’s Xetra platform under a contract that expires in 2012. Bulgaria has discussed ways to sell its bourse stake over the past decade with Sweden’s OMX AG and exchanges in Austria, Greece and Poland to boost interest in local stocks and make trading more transparent.

“A technology provider doesn’t necessarily have to be the strategic investor, but it is a certain advantage,” Takev said. “We are working to boost liquidity, which was slashed in the past three years, to restore market growth and investor confidence. I hope in some three to four years we’ll achieve this.”

The exchange will become a public company after the Financial Supervision Commission approves its prospectus by the end of the year, Takev said. The bourse will sell the remaining 50 percent held by private investors including brokerages and banks.

The stock exchange increased requirements for companies in the benchmark index Sofix, which fell almost 19 percent in 52 weeks to 397.09 today.

Reduction in Members

It reduced the 20 Sofix members to 15, Takev said. Sofix members must have 25 percent of their capital traded on the stock exchange by Sept. 2011. It had to raise the amount of publicly traded shares to 15 percent this month from a previous 10 percent.

The European Union’s poorest country in terms of per-capita gross domestic product, is struggling to end its first recession in more than a decade after a three-year lending boom stalled and foreign investment dried up during the global credit crisis. Its economy shrank 1.4 percent in the second quarter.

“The global financial crisis led to a situation where the Sofix index included several illiquid companies and there were not enough bigger companies to replace them with,” Takev said. “So the number of companies in the benchmark index had to be cut as a consequence of the stock exchange’s reduced liquidity.”

Dropouts, Additions

Nine companies that dropped out of the Sofix include the Elana Agricultural Land Opportunity Fund, Neohim fertilizer maker, Sparki Eltos, an electrical tool maker, Corporate Commercial Bank AD, construction companies Trace Group Holding AD and Holding Co. Roads, the Olovno Tzinkov Komplex AD smelter, M+S Hidravlik and Orgachim, a paint producer.

The new companies added to the Sofix include Doverie Holding AD, which runs companies involved in the production of chemicals, oil, construction materials, textiles and dairy goods; Zarneni Hrani Bulgaria AD, a grain and oil-yielding seeds producer and trader, owned by Chimimport, Bulgaria’s biggest business group.

The other two additions are Stara Planina Holding, which groups companies producing piston and plunger hydraulic cylinders, batteries and oils, and Advance Terrafund, a land investment fund.

To contact the reporters on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net;

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