Building a giant

Polish chemical group Boryszew and metals trader Impexmetal have announced their intention to merge next year, creating an industrial-sector giant comprised of 17 firms in six sectors with combined sales of nearly zł.4 billion. The president of Boryszew's management board, Krzysztof Sędzikowski, says the fusion should be complete by June next year.

"We want to form a strong industrial group with a centralized management and a common financial strategy," said Sędzikowski. "By doing this we will increase the scale of activities as well as the transparency, which will help us gain long-term investors," he added.

According to the merger plans, Boryszew will take control of Impexmetal, in which it took a 48-percent share in January. The resulting capital group will be dominated by Poland's fifth-richest man, Roman Karkosik, who already holds a 20-percent stake in Impexmetal, as well as 46 percent of Boryszew's shares. The result will be a holding company with some zł.2 billion capitalization 66-percent owned by Karkosik, which will very likely list on the WIG20 blue-chip index with a free float of zł.400-450 million. That would make it the largest industrial group in Poland.

Both companies have experienced sluggish sales this year, and company officials say the merger will allow them to pool their resources and cut costs, such as on transportation. Boryszew blames high crude oil prices for first-half profits being lower by nearly two-thirds on the same period last year. Management would be trimmed down as well, as "there is a wide synergy between specific business units, for example in construction," according to Sędzikowski, who added that the selloff of some units was possible.

"Certain companies in sectors recognized as stagnant will be designated for sale, we cannot rule this out," he said.

Sometime next month, a formal plan for the merger will be presented that should spell out how the two companies plan to untangle their shareholding structures. Boryszew has already begun moves to simplify its ownership. Last week the company announced the cancellation of 21 million of its own shares, which will take effect at the beginning of next year. As a result, Karkosik's stake in the chemical producer will rise to 60 percent, while Boryszew's stake in itself will drop to just 10 percent.

Company officials added that the new entity will also most likely get a new name, which has not yet been revealed.