BRE Bank makes bold bid to win PTC

BRE Bank, an aggressive player in the local equity market, said last week it wanted to buy cash-strapped Elektrim's prized mobile phone assets in a bold private venture deal. Hoping to benefit from depressed telecoms values and the ailing conglomerate's financial crisis, BRE will create a holding company with Dutch-based investment fund Eastbridge to buy Elektrim's 49% in Elektrim Telekomunikacja. BRE said it would wait two to three years before selling out of ET, a joint venture with French-American media giant Vivendi Universal, which owns a majority stake in Eastern Europe's largest mobile telephone operator, Polska Telefonia Cyfrowa (PTC). The BRE-Eastbridge deal follows news earlier this month that a Citigroup-led consortium including Eastbridge wants to buy Vivendi Universal's 49% stake in ET for a price anticipated by some at $600 million.

BRE Chief Executive Wojciech Kostrzewa said his bank, which is half-owned by Germany's Commerzbank, would look to consolidate the two ET stakes and later sell it to a new owner. The deals, if completed, will shake up ownership of Polish mobile phone assets and could position BRE, known for its adventurous deal making, to benefit as European Union entry and a recovering economy boosts Polish asset values. BRE conducted a similar operation in 2000 when it bought troubled computer maker Optimus and divided it into hardware and Internet arms, hoping to gain on future sales. PTC has profited from BRE before. It earned a tidy sum on the sale of its 5% stake in the mobile operator to Elektrim for $215 million in 1999. "I'm assuming that in 2004 Poland will join the EU and as a member rather than a candidate state different valuations will be put on telecoms stakes," Kostrzewa said. He said he had no particular buyer in mind at the moment. Elektrim faces bankruptcy proceedings after defaulting on €480 million ($423 million) in bonds. Investors were worried BRE Bank's offer would be low as media speculated the company might earn only €350 million-€400 million on the sale. BRE's share price closed down 4.6% at zł. 134.50 while Elektrim plummeted 30% to zł. 5.90 per share for the five-day period ending Thursday.

EU looks at investment limits The EU last week said it will examine whether Polish laws curbing foreign investment by pension funds that receive state money are compatible with European law. The EU has long pressed Poland, the largest of 12 mostly ex-communist countries negotiating for accession in 2004, to relax rules allowing maximum foreign investment of 5% for funds taking state money as part of the country's mandatory pensions scheme. Increasing this threshold could hit Warsaw-listed stocks and bonds, since it would effectively reduce new cash flows into Polish assets, analysts said. Poland argues that the firms concerned, though privately managed, are part of the state social security system, which gives it the right to decide where and how they should invest. But the EU's 15 member states said they had instructed the bloc's executive, the European Commission, to prepare a report that would evaluate that claim. "The commission will report on the adoption and implementation by Poland of the acquis (EU laws) regarding investment rules for capitalized occupational pension funds," said the statement, presented to Polish officials during a round of accession negotiations. Having the report is part of a deal with the EU that allowed Poland to close negotiations in the area of free movement of capital, one of 29 negotiating chapters that need to be agreed upon before any country can join the union.

Poland's 19 privately managed pension funds receive state money as part of a "second pillar" scheme created to supplement the state's pay-as-you-go pension system in 1999. The funds received zł. 8.7 billion ($2.12 billion) in premiums from the state's social security office last year, investing a quarter of their inflows on the bourse. Some EU states have said the funds should be subject to EU directives on private capital flow rules, but Polish chief EU membership negotiator Jan Truszczyński again rejected this view. He said he was confident that the commission report would back Polish claims. He ruled out liberalizing foreign investment rules for the pension funds unless the EU changes the law to clarify its application in regard to the Polish position. - Compiled from Reuters