"During the process it was established that there were important environmental questions which were unanswered and had an important impact on the sales procedure and the value of the bids," reads a statement issued by Modra zavarovalnica, a pension insurer which led the consortium.

The sellers, including the Slovenian Sovereign Holding, Bank Asset Management Company and several investment funds, agreed to seek solutions to the environmental questions before restarting the sale of the 70.79% share.

The announcement comes in the wake of revelations of alarming values of toxic heavy metals at the main production site of chemical company Cinkarna Celje.

The Celje-based company hired in July German company CDM Smith to prepare a clean-up plan for the site.

Cinkarna chairman Tomaž Benčina commented for the STA by saying that the sellers' expectations ahead of the sales procedure had been too great.

He agreed that environmental issues were too big a risk for prospective buyers, but added: "If we lived on our own so far, we'll continue to do so".

The development was welcomed by the in-house trade union, which has been opposing the sale throughout, underscoring the company was profitable and had set aside EUR 17m to deal with environmental issues.

The head of the union Franc Grabler was especially bothered by the idea to sell the company to a foreign buyer, saying it was nonsense to sell a profitable business and was hopeful it would not be sold at all.

According to unofficial information cited by the Dnevnik and Finance newspapers, the almost 71% stake in the company had been eyed by Treibacher Industrie of Austria, Grupo Azoty of Poland and The Gores Group from the US.

The prospective buyers were reportedly concerned that after buying the company from the state, the latter would require of them to tackle environmental problems stemming from the past.

Set up in 1873, Cinkarna Celje manufactures titanium dioxide pigment and has a workforce of almost 1,000. It has been operating at a profit throughout, posting a net profit of just shy of EUR 14m on EUR 161m on sales last year.

This is the second failed privatisation from the list of 15 companies slated for sale by parliament in 2013. Last month the sole bidder for Telekom Slovenije, UK buyout fund Cinven, withdrew from the process.