The State Property Committee violated its previous decision to sell the company off through an investment tender, said the spokesman, who asked not to be identified.
"The investment tender scheme could be more suitable and profitable for the company and could help attract real investments," he said in a telephone interview from the company's headquarters in Novodvinsk, near Arkhangelsk. "The scheme is inadmissible for our giant enterprise. The company is going to be sold off for a kopek."
An investment tender obligates the top bidder to invest a fixed amount of money in the company, whereas a shares auction merely gives control of a stake to the winner.
The suit was filed last week in the Moscow Arbitration Court and a hearing is scheduled for Nov. 28, court officials said. Meanwhile the court has taken a preliminary decision to postpone preparations for the auction, earlier scheduled for Dec. 7.
The State Property Committee planned to auction 20 percent of the mill's charter capital, or 156,045 shares, with the starting price fixed at $5 million.
Spokesman Igor Plotnikov said the committee is sure it will win the case, but he acknowledged that the suit was "unexpected" and said it would hold up the privatization process. The scheme allows banks to bid for state-owned shares in 27 key firms, including the cream of Russian enterprises -- oil companies LUKoil, Yukos and Surgutneftegaz, metal giant Norilsk Nickel and the Far East Shipping Company.
Banks will be able to sell the shares after September 1996 and keep 30 percent of the capital gains.
Other companies also have disagreed with the government about the terms of the auctions.
The Nosta metal company, the Oskolsky electro-metallurgical factory and the Irkutsk aviation plant have lobbied successfully to be removed from the original list of companies to be sold off, while the property committee has been forced to change the percentage of shares planned for auctions in the forestry enterprise Kirovlesprom, and aviation concerns OKB Sukhoi design bureau and the Ulan-Ude and Progress plants.
In the only loans-for-shares auction so far, that of 40 percent of Surgutneftegaz, the company pension fund won the stake, a move applauded by the State Property Committee.
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