Bank presidents confident Handlowy merger will go through; PZU fights on
Despite pending lawsuits aimed at blocking the Bank Handlowy-BRE Bank merger, the heads of the two banks appeared confident last week that the deal will now go through.
Handlowy CEO Cezary Stypulkowski said the bank was currently preparing its issuing prospectus, which is set to be submitted to the Securities and Exchange Commission (KPWiG) by year's end.
"According to the agreement (between the banks' management boards) the merger should be completed by the end of June next year," said Wojciech Kostrzewa, BRE Bank president. "We are convinced that the deal will be concluded by this time."
This optimism is not shared, however, by insurer Powszechny Zaklad Ubezpieczen (PZU), which is filing a slew of lawsuits to try and block the merger. PZU, a Handlowy shareholder, along with the Treasury Ministry has opposed the terms of the merger, namely the share-swap ratio of 1 BRE share for 2.4 Handlowy shares. PZU and the ministry want a ratio of 1 BRE share for 1.7 Handlowy shares.
Even with lawsuits pending, Kostrzewa said the banks would begin working on an integration process even though they will continue to function as separate entities.
And Stypulkowski remained confident that a deal could still be worked out among his bank's dissident shareholders. "I hope that some kind of consensus will be reached between both groups of shareholders," he said.
PZU President Wladyslaw Jamrozy also claimed he was pushing for a consensus. But the rhetoric he used to describe the insurer's attitude toward Handlowy made compromise sound like a faint possibility.
PZU is angered by the fact that Handlowy shareholders decided to treat the insurer and the ministry as one entity, thus limiting their voting rights to 10%. The shareholders also treated funds where PZU had parked shares as one entity and so limited their votes. In this manner, the bank was able to prevent PZU and the ministry from blocking the merger.
But Jamrozy has charged that this maneuver was illegal. "The methods applied by the shareholders meeting were those of a gangster," Jamrozy said during a press conference last week. "And one doesn't negotiate with gangsters."
Apart from a lawsuit filed by PZU immediately after the shareholders meeting, the insurer seemed ready to try and sue everyone for everything to block the merger.
The most serious charge levied by PZU alleges that the merger will allow Commerzbank to exceed a 10% share limit in Handlowy without acquiring the necessary permission to do so; that Handlowy's board didn't inform overseas investors about substantial opposition to the merger; and that Handlowy's board voted with global depositary receipts (GDRs) against the instructions of GDR holders. The insurer is alleging that both Handlowy and BRE violated banking secrecy and personal data protection laws by revealing information about PZU to each other, without permission. The banks have denied the charges.
"All information about customers was exchanged within the limits set up by the law," Kostrzewa said. "Or as aggregate information." He and Stypulkowski added that PZU's charges were killing chances for a compromise, a view that analysts agreed with. "This type of exchange doesn't create many chances for compromise," said Artur Szeski, a banking analyst with CDM Pekao Securities.
But others believe that the present situation is one in which there will be only losers, and that's why both groups of Handlowy's shareholders will try to find a way out. "No solution means that Handlowy's investment will lose its value," said Marek Juras, a banking analyst with Erste Securities Polska.
Therefore the most probable solution is that Handlowy's most stable investors, including Commerzbank, will agree to buy PZU's shares for double their value. "I think that zl. 70 per share is a price both parties will accept," Juras said.
But in such a situation, Commerzbank and the other core shareholders would also face a moral dilemma, he said, adding that this solution wouldn't be fair to the rest of shareholders.
During last week's press conference, Handlowy's Stypulkowski didn't reject the possibility of a side deal with PZU.
"But if it happens, we will do everything possible to make it as transparent as the entire deal," Stypulkowski said.
