Serbia has abandoned a long-standing plan to sell a controlling stake in drugmaker Galenika after bidders failed to satisfy the government's expectations for the sale.

The sale was scrapped after only one major international pharmaceutical company expressed an interest and those that placed bids were rejected "as far weaker than Galenika itself," Economy Minister Mladjan Dinkic said in a broadcast by Belgrade's B92 television on Monday.

"We abandoned the idea to privatise it (Galenika) because there were no bidders that were stronger than Galenika itself," said Dinkic, who is also Serbia's deputy prime minister. He gave no further details about the bids.

Earlier this year, Serbia's privatisation agency said the minimum price for a 70% stake was €200 million, in line with recommendations by advisors Rothschild and Citadel. The sale of Galenika was part of Serbia's 2008 plan to privatise its key state-run companies and distribute free shares to about 5 million people.

The plan was frozen after the financial downturn scared investors away from many emerging markets.

In late April, Britain's AstraZeneca, Greece's Alapis, Indian group Surya Pharmaceuticals and Cyprus-based RPG Partners placed pre-qualification bids which failed to meet the terms of the tender, said a government official who asked not to be named.

"Several other companies negotiated with us about Galenika since 2008, and we were not happy with their offers," he said without elaborating.

Under the terms of the tender launched in December 2009, bidders were required to have at least five year's experience in the pharmaceutical industry and have 2008 revenues from the sale of pharmaceutical products of more than €100 million. Investors who in 2008 had more than €250 million in managed assets were also allowed to bid.

Dinkic spoke at the opening of Galenika's €50 million worth production line with planned annual output of 2 billion tablets and 100 million capsules of various drugs. The government will instead support Galenika's efforts to expand to Africa, Asia, Europe and Russia, Dinkic said.

"Serbia has enough strength to develop pharmaceutical industry with own resources," he said.

Milos Bugarin, the head of Serbia's Chamber of Commerce said the state should keep a majority stake in Galenika and "seek a strategic partner which will make it more competitive ... The company needs a strategic partner ... from the same business and not the one which will try to extract profits through speculation," Bugarin said.

Belgrade-based Galenika produces 90% of the medicine on the Serbian market but measured by earnings, its market share is only around 13%.

(6/22/2010)