Bulgaria has cancelled the privatisation of its state-owned defence group VMZ Sopot owing to a lack of investor interest, the privatisation agency announced on Monday.

The sole bidder for VMZ, the Bulgarian firm Emko, submitted a binding offer but did not pay a required tender deposit by the deadline on Monday, privatisation agency chief Emil Karanikolov told state BNR radio.

"Due to the fact that this was not done, our sole legal move was to cancel the privatisation procedure," he said.

Emko's offer reportedly would also have involved massive layoffs at the plant, which runs counter to the government's privatisation strategy, Karanikolov added.

Bulgaria's biggest defence firm and the last one that is state-owned, VMZ was put up for privatisation in July.

Although far from its communist-era glory, the company still produces a broad range of missiles and artillery ammunition, in addition to civil-use machinery and household appliances.

However, VMZ's 3,328 workers have staged several strikes in recent weeks to press their demands for unpaid salaries, social security and healthcare payments.

The options now before the indebted company are insolvency or a fresh attempt at privatisation, Karanikolov said Monday.

A lack of strategic investors in previous defence company tenders led other state-owned firms to morph into joint-stock companies, owned primarily by their managers and staff.

Bulgaria's defence industry exports stood at 300 million euros ($400 million) in 2011, according to the economy ministry.