Artrio-2 abandons bid for vodka maker

In an abrupt about face, the most likely purchaser for one of Lithuania's state-held alcohol companies has announced that it will withdraw from negotiations and defer to the next highest bidder.
Artrio-2, the local distributor of alcoholic beverages that was pegged to acquire a controlling stake in both Anyksciu vynas (Anyksciai Wine) and Vilniaus degtine (Vilnius Vodka) has sent a letter to the State Property Fund, the agency in charge of privatization of government-held companies, indicating its desire to pursue negotiations only for Anyksciai Wine.
The sudden reversal of fortunes has once again thrown into doubt the state's ability to pull off key privatization sales that can fill government coffers.
Last month the high-profile privatization of Lithuanian Airlines was canceled when the only potential bidder, SAS, backed out of negotiations.
State property sellers will now bargain with the second-highest bidder, Belvedere Dystrybucja, a Polish subsidiary of the French-held Belvedere group.
"We've been working with Vilnius Vodka for a long time now -- since 1999," said Raimundas Cicirka, general director of Belvedere prekyba (Belvedere Market), the Lithuanian branch of Belvedere Dystrybucja.
"We're interested in Vilnius Vodka for the high quality of its products, with which we have had much experience," said Cicirka.
While Belvedere Market believes it stands to profit from the pending deal, the reasons for Artrio-2's disengagement from the bidding process have remained confidential.
"We cannot comment on the situation at this time," said Alvydas Sekavicius, Artrio-2's general director.
The widely held speculation that Artrio-2, which was the only finalist in the bidding process for Anyksciai Wine and the only company to enter negotiations for both liquor producers, would indeed become the majority shareholder in both state-held companies was propagated in the local media and not overtly denied by officials at the State Property Fund.
"We never claimed that Artrio-2 was going to acquire the stakes in both companies," said Antanas Malikenas, privatization director at the State Property Fund.
"We do not comment on negotiations while they are still underway," he said.
Though the government will be holding talks with the runner-up in the bidding process for Vilnius Vodka, it still stands to make a hefty profit from the transaction.
While the initial asking price for the vodka distiller was only 5 million litas (1.5 million euros), Belvedere came in four times higher, offering 20 million litas for the company. By comparison, Artrio-2's bid was 24 million litas.
Experts see the ambitious bids as a sign of a healthy privatization process.
"The fact that companies are willing to risk their own capital is a sign that they see the state-held entities as a potential integral part of their business plans," said Remigijus Simasius, senior analyst at the Lithuanian Free Market Institute. "For this reason, we have continually claimed that it is best for the government to sell institutions to the highest bidder and not constrict the process with artificial conditions," he said.
During this privatization process, the State Property Fund stipulated that qualified bidders must have had at least five years' experience in the alcoholic beverage sector.
The government hopes to name the winners of tender offers for the remaining two state alcohol producers, Stumbras and Alita, by the end of the month and conclude talks on Anyksciai Wine and Vilnius Vodka in early July.
Given the lucrative market for alcoholic beverages, state financial officials are hoping to reap a windfall.