YEREVAN (Noyan Tapan)–The Armenian government officially deemed the French Pernod Ricard company the winner in the privatization tender of the Yerevan Brandy Factory. The $30 million deal will be closed next week–member of the government privatization committee and Minister for Economic and Structural Reforms Vaghram Avanessian reported. Pernod Ricard has pledged to invest at least 30 million fran’s ($5 million) in cultivating grapes and vinelands in Armenia in the next five years.
According to the deal–the company will buy 100 percent of the factory’s shares. Two million dollars are to be paid up front–while the remaining $28 million are to be paid no later than December 10–1998. The French side insisted on this payment plan so that Armenia does not fail to maintain the deal.
Avanessian and Minister of Economy and Finance Edward Sandoyan disputed the allegation that the factory was sold at a price which was much lower than its worth. It has been suggested that only the cost of the alcohol reserves of the factory are worth $60 million.
Avanessian and Sandoyan reported that the factory was appraised according to international standards–taking into consideration the margin of profit to volume of assets and sales. The ministers said that the above-mentioned price was approved by the Merill Lynch firm which represented Armenia’s interests.
The contract terms include the following points:
a) the brandy should be produced exclusively of Armenian raw materials;
b) bottling should be done only in Armenia;
c) all the characteristics of the Armenian brandy (taste–etc.)–and the peculiarities of the label design should be preserved;
d) within the next five years the volume of the brandy production should be brought up to 425 decaliters a year–as it has produced 270.4 decaliters in the last three years;
e) the Pernod Ricard company cannot sell the factory to a third party during the first ten years without the Armenian government’s authorization. After the ten year period–the company can sell the factory only if meeting certain conditions;
f) the average age of the produced brandy will be no less than ten years;
It was pointed out that within the next five years–the brandy factory will increase the volume of purchases of grapes up to 40 thousand tons a year–compared to 15 thousand tons in 1997. It was reported that Pernod Ricard has decided to settle the deals directly with the farmers.
The government hoped that Pernod Ricard–being one of the major fruit-purchaser in the world–can considerably increase purchases of apples–apricots and other fruits from Armenia.
Participants of the press-conference stressed that the controversy regarding the sale of the brandy factory had a negative impact on the final negotiations of the deal.
Avanessian said that if parliament is led by those who demand to take the factory off the privatization list–the sale of the factory will never again be possible.