GG&MW Says not to Sell Borjomi Business

A company holding license for production of Borjomi mineral water, Georgian Glass and Mineral Water (GG&MW), said its shareholders had no plans to sell the business even if the renewed license would go to some other company.

The Georgian Economy Ministry said on February 17, that it planned to auction a license for extraction and processing of Borjomi mineral water with a starting price of USD 8 million. GG&MW obtained 10-year license for Borjomi production in 1997. Since 2007 the license had been extended once in every six months and the most recently the license was extended only for three months expiring in March. GG&MW also owns rights to ‘Borjomi’ trademark.

"We note that auction terms call for the winner to comply with a number of technical, hydro-geological and environmental requirements that is not possible without the infrastructure which is owned by GG&MW,” the company said in a statement on February 19. “It means that it is not technically possible for anybody else [except of] GG&MW to fulfill the obligations the winner of the auction has to take. In other words, if anybody else were to win the auction he would have been immediately in the breach of his obligations according to the auction terms and conditions.”

The company also said that that over last 12 years it invested “tens of million of dollars” in building and developing the Borjomi business infrastructure, such as water resources exploration, wells, pipelines, factories, equipment, warehouses, brands/trademarks, sales and distribution networks.

“GG&MW owns all assets involved in production of Borjomi water. We will continue to own and operate them even post-auction independently of any auctions. The company will not sell any of its property in Georgia, and the shareholders of the company will not sell their shares,” it said.

“We of course respect the Georgian government’s right to announce the auction but rather want to make clear that what is being auctioned is not Borjomi business but only water extraction right,” GG&MW said. “It would take several years and tens of million of dollars of investments for other company than GG&MW to build the necessary infrastructure.”

GG&MW apart of private investors, including its top management, is owned by Salford Capital Partners Inc. – a private equity and investment management firm, which was also involved in managing late tycoon Badri Patarkatsishvili’s assets in Georgia.

Irakli Rukhadze, a chief executive of Salford Georgia, said in his recent interviews to the Georgian press that his firm had been experiencing uncertainty over Borjomi production, related to short-term extensions of the license.

He has also claimed that senior Georgian officials, in particular Gigi Ugulava, the Tbilisi mayor and then defense minister, Davit Kezerashvili, met him last year and told to give up GG&MW in favor of Wimm-Bill-Dann, a leading Russian food producer; Rukhadze said that he had refused. Wimm-Bill-Dann purchased Georgian Foods Ltd in 2007, which at that time was the third largest dairy producer in Georgia.

GG&MW said that the company had lost GEL 25 million in 2006 after Russia banned import of Georgian mineral waters. It, however, said that by 2008 the company managed to overcome the crisis and sales volumes reached to pre-2006 figures. The sales and export of Borjomi mineral water dropped again starting from October 2008 by 30-40% because of the global financial crisis, according to GG&MW.

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