BRE takes lead in three-way race to PBR finish line
BRE issued a public tender on April 2 for all of PBR's shares, catching off guard the two foreign banks - Sweden's Skandinaviska Enskilda (S-E-Banken) and Germany's Bayerische Landesbank (BLB) - courting the Polish institution. S-E-Banken and BLB immediately responded by declaring they would come out with their own bids, but so far neither has done so.
BRE offered zl. 22.50 a share, a 13% premium to the bank's trading price that day. Analysts said they do not expect S-E-Banken or BLB to offer much above that price. If that is the case, they said, the Treasury Ministry, which holds a 30% stake in the bank, will feel more comfortable selling its shares to BRE. Similar in size and scope, the two banks combined would create a strong institution with considerable expertise in investment banking, analysts said, while selling PBR to a foreigner would only further fragment the country's banking sector.
"On the one hand the State Treasury would like to get a good price," said Sonja Shechter, equity analyst with Daiwa Europe. "On the other, it will want to strengthen the Polish banking sector knowing that soon the market would fully open for foreign players."
A merger would create the fifth largest bank in Poland with combined total assets of zl. 8 billion ($2.31 billion), and the fourth largest brokerage house with 20% market share. Poland will open its banking sector to full-scale competition from foreigners in 1999 to meet Organization for Economic Cooperation and Development (OECD) guidelines.
The market appears to agree with that line of thinking. BRE's share price was up 13.68% last week, closing at zl. 108 on Thursday. PBR's price also rose 23.12% to close Thursday at zl. 24.50.
"The market buys the story," said Jean-Pierre Lambert, an analyst with Dresdner Kleinwort Benson in London.
In addition to the Treasury Ministry, PBR's other major shareholders include Powszechny Bank Kredytowy (PBK) with 33%, the Industrial Development Agency with 15% and Citibank with 7%. BRE holds slightly more than 1%.
BRE has a distinctive advantage over the other bidders, analysts said, because many of its managers have ties to PBR. BRE Deputy President Wojciech Kostrzewa saw PBR through its first years of existence, having been named president of the bank when it was established in 1990. He moved over to BRE only two years ago.
Hubert Janiszewski, managing director at HSBC Investment Services, agreed that Kostrzewa's presence gives BRE an advantage in PBR's sale. HSBC was PBR's privatization adviser when the bank went public in 1995.
"But we must remember that a lot of things have changed in two years," he said. "And it would be wrong if the decision made is based on sentimental reasons."
Four other senior managers at BRE moved from PBR. Daiwa's Shechter said that experience gives BRE's managers crucial insight into PBR's strategy and its products and makes merging the two banks relatively painless. She also said the two share the same vision, creating strong investment and corporate banking operations and plundering niche markets.
"The difference is that BRE is more successful" right now, Shechter said.
S-E-Banken and BLB refused to say what kind of offer they plan to make for PBR, but analysts said their share bids are likely to fall in the zl. 25-zl. 30 range.
"Theoretically, the sky is the limit," said Paul Jennings, an analyst with Thomson BankWatch-Bree. "But I don't think anybody would want to pay too much."
Jennings said it was difficult to come up with a set figure on what PBR is worth. "You can evaluate people, you can evaluate the assets, but it's difficult to evaluate potential," he said.
Daiwa's Shechter said PBR's results last year were somewhat lacking. The bank watched its operating profit drop to zl. 42.5 million ($13.28 million) in 1997 from zl. 45 million ($16.6 million) in 1996.
BRE offered zl. 22.50 a share, a 13% premium to the bank's trading price that day. Analysts said they do not expect S-E-Banken or BLB to offer much above that price. If that is the case, they said, the Treasury Ministry, which holds a 30% stake in the bank, will feel more comfortable selling its shares to BRE. Similar in size and scope, the two banks combined would create a strong institution with considerable expertise in investment banking, analysts said, while selling PBR to a foreigner would only further fragment the country's banking sector.
"On the one hand the State Treasury would like to get a good price," said Sonja Shechter, equity analyst with Daiwa Europe. "On the other, it will want to strengthen the Polish banking sector knowing that soon the market would fully open for foreign players."
A merger would create the fifth largest bank in Poland with combined total assets of zl. 8 billion ($2.31 billion), and the fourth largest brokerage house with 20% market share. Poland will open its banking sector to full-scale competition from foreigners in 1999 to meet Organization for Economic Cooperation and Development (OECD) guidelines.
The market appears to agree with that line of thinking. BRE's share price was up 13.68% last week, closing at zl. 108 on Thursday. PBR's price also rose 23.12% to close Thursday at zl. 24.50.
"The market buys the story," said Jean-Pierre Lambert, an analyst with Dresdner Kleinwort Benson in London.
In addition to the Treasury Ministry, PBR's other major shareholders include Powszechny Bank Kredytowy (PBK) with 33%, the Industrial Development Agency with 15% and Citibank with 7%. BRE holds slightly more than 1%.
BRE has a distinctive advantage over the other bidders, analysts said, because many of its managers have ties to PBR. BRE Deputy President Wojciech Kostrzewa saw PBR through its first years of existence, having been named president of the bank when it was established in 1990. He moved over to BRE only two years ago.
Hubert Janiszewski, managing director at HSBC Investment Services, agreed that Kostrzewa's presence gives BRE an advantage in PBR's sale. HSBC was PBR's privatization adviser when the bank went public in 1995.
"But we must remember that a lot of things have changed in two years," he said. "And it would be wrong if the decision made is based on sentimental reasons."
Four other senior managers at BRE moved from PBR. Daiwa's Shechter said that experience gives BRE's managers crucial insight into PBR's strategy and its products and makes merging the two banks relatively painless. She also said the two share the same vision, creating strong investment and corporate banking operations and plundering niche markets.
"The difference is that BRE is more successful" right now, Shechter said.
S-E-Banken and BLB refused to say what kind of offer they plan to make for PBR, but analysts said their share bids are likely to fall in the zl. 25-zl. 30 range.
"Theoretically, the sky is the limit," said Paul Jennings, an analyst with Thomson BankWatch-Bree. "But I don't think anybody would want to pay too much."
Jennings said it was difficult to come up with a set figure on what PBR is worth. "You can evaluate people, you can evaluate the assets, but it's difficult to evaluate potential," he said.
Daiwa's Shechter said PBR's results last year were somewhat lacking. The bank watched its operating profit drop to zl. 42.5 million ($13.28 million) in 1997 from zl. 45 million ($16.6 million) in 1996.
