Calling for Kutno
The U.S. offer would not only top Italian concern Recordati's current offer by some eight to 13 percent, but has been widely declared as preferable for both Kutno's management and shareholders. Yet the market's reaction, so far circumspect, suggests that Recordati is certainly not out of the picture yet. Analysts, meanwhile, expect things to get hotter still, as IVAX's offer may not be the last one.
Kutno's management is keen to make it quite clear that, in their view, joining the IVAX group presents significantly preferable growth opportunities for the company than the prospect of Recordati as a strategic investor. IVAX has achieved proven success in the CEE region, including its own subsidiary and sales networks in Poland which, under the plan, would be merged with Kutno. With 60 percent of its product portfolio consisting of generic products, it will better complement Kutno's range than Recordati; furthermore, the company's interest in developing generics is also perceived as likely to recommend it to the Treasury. While Recordati wants only 50 percent of Kutno's stock, Kutno interprets IVAX's desire to acquire the whole shareholding as an indication that it is more committed to the company's success than its Italian rival is. Another major plus is the U.S. firm's expressed committment to support Kutno's bid to acquire the government's 30 percent share of local generic producer Jelfa as a step to a possible future Kutno-Jelfa merger.
Since IVAX's listing would make it only the second-ever foreign company to be listed on the Warsaw Stock Exchange (WSE), the WSE also stands to benefit, according to IVAX representatives, who noted in a statement to Kutno, that the move would enhance the international profile of the Polish capital market.
According to Kutno PR Manager Krzysztof Kouyoumdjian, the IVAX offer is also preferable to Polfa's shareholders. As well as a price that is eight percent higher, and which will be raised to 13 percent if it manages to acquire 92 percent control, IVAX provides shareholders with a guaranteed buyer for all their Kutno stock. What is more, by offering not cash, but IVAX shares, the Americans present domestic financial investors who are normally restricted from investing abroad with an unusual chance to diversify.
Yet Kutno's shares, though climbing, had not, by press time, exactly leapt at the news of the U.S. offer, and though Kouyoumdjian attributes this to the fact that the IVAX call is still an intention rather than a reality, analysts have other ideas.
"Seventy percent of Kutno's shareholders are local investors interested in this region," says Tomasz Bardziłowski, analyst at DM BZ WBK. "If they did swap their stock, they would probably try to sell it off straight away, which obviously wouldn't be that good for the company."
President of the Recordati group, Giovanni Recordati, is also keen to point out the dangers involved in swapping Kutno for IVAX shares.
"There is a risk - IVAX are not giving cash, after all," he says.
And Recordati still hasn't played its last card, either. The Italians probably have until July before the Americans get all the necessary permits for them to act. But already last week, Giovanni Recordati was allowing the possibility of a higher bid: "Will we raise it tomorrow? No!," he said. "But business decisions are considered depending on the circumstances," he continued.
"Recordati has to do something," says Tomasz Bardziłowski, "but even if they do raise the price to, say, zł.320, the fact that they're only after a 50 percent piece means that it could be difficult for shareholders to get a clean exit."
As Kutno shares are still trading below the U.S. offer, it looks as if, for the moment, all eyes are still on the Italians.
Of the 20 biggest pharmaceutical concerns on the local market, all are foreign controlled, with the exception of Polpharma (number 3) and Polfa Kutno (number 14) and though, according to market insiders, Polpharma may find it a struggle to go it alone on the common market, the company's major shareholder, Jerzy Starak, who is also president of the company's supervisory board, has to date shown no signs of interest in a strategic investor.
Meanwhile, the present government has no intention of selling off the three small 'Polfas' still controlled by the State Treasury either. As a Treasury spokesperson confirmed last week, the government still plans to merge better-performing Polfa Warszawa and Polfa Pabianice with debt-ridden and trade-union-gripped Polfa Tarchomin. And though there is talk of later issuing around a third of the holding's stock on the WSE, the possible attraction, for any strategic investor, of a minority stake in the resulting government owned entity, is not hard to assess.
The next government, may, of course have a different approach. But for the moment at least, all ambitions are likely to be centered on Kutno and Jelfa.
"I wouldn't be surprised," says Tomasz Bardziłowski, "if the final bids were higher than zł.325."
Other analysts, however, have reputedly mentioned even higher sums.
Kutno's management is keen to make it quite clear that, in their view, joining the IVAX group presents significantly preferable growth opportunities for the company than the prospect of Recordati as a strategic investor. IVAX has achieved proven success in the CEE region, including its own subsidiary and sales networks in Poland which, under the plan, would be merged with Kutno. With 60 percent of its product portfolio consisting of generic products, it will better complement Kutno's range than Recordati; furthermore, the company's interest in developing generics is also perceived as likely to recommend it to the Treasury. While Recordati wants only 50 percent of Kutno's stock, Kutno interprets IVAX's desire to acquire the whole shareholding as an indication that it is more committed to the company's success than its Italian rival is. Another major plus is the U.S. firm's expressed committment to support Kutno's bid to acquire the government's 30 percent share of local generic producer Jelfa as a step to a possible future Kutno-Jelfa merger.
Since IVAX's listing would make it only the second-ever foreign company to be listed on the Warsaw Stock Exchange (WSE), the WSE also stands to benefit, according to IVAX representatives, who noted in a statement to Kutno, that the move would enhance the international profile of the Polish capital market.
According to Kutno PR Manager Krzysztof Kouyoumdjian, the IVAX offer is also preferable to Polfa's shareholders. As well as a price that is eight percent higher, and which will be raised to 13 percent if it manages to acquire 92 percent control, IVAX provides shareholders with a guaranteed buyer for all their Kutno stock. What is more, by offering not cash, but IVAX shares, the Americans present domestic financial investors who are normally restricted from investing abroad with an unusual chance to diversify.
Yet Kutno's shares, though climbing, had not, by press time, exactly leapt at the news of the U.S. offer, and though Kouyoumdjian attributes this to the fact that the IVAX call is still an intention rather than a reality, analysts have other ideas.
"Seventy percent of Kutno's shareholders are local investors interested in this region," says Tomasz Bardziłowski, analyst at DM BZ WBK. "If they did swap their stock, they would probably try to sell it off straight away, which obviously wouldn't be that good for the company."
President of the Recordati group, Giovanni Recordati, is also keen to point out the dangers involved in swapping Kutno for IVAX shares.
"There is a risk - IVAX are not giving cash, after all," he says.
And Recordati still hasn't played its last card, either. The Italians probably have until July before the Americans get all the necessary permits for them to act. But already last week, Giovanni Recordati was allowing the possibility of a higher bid: "Will we raise it tomorrow? No!," he said. "But business decisions are considered depending on the circumstances," he continued.
"Recordati has to do something," says Tomasz Bardziłowski, "but even if they do raise the price to, say, zł.320, the fact that they're only after a 50 percent piece means that it could be difficult for shareholders to get a clean exit."
As Kutno shares are still trading below the U.S. offer, it looks as if, for the moment, all eyes are still on the Italians.
Of the 20 biggest pharmaceutical concerns on the local market, all are foreign controlled, with the exception of Polpharma (number 3) and Polfa Kutno (number 14) and though, according to market insiders, Polpharma may find it a struggle to go it alone on the common market, the company's major shareholder, Jerzy Starak, who is also president of the company's supervisory board, has to date shown no signs of interest in a strategic investor.
Meanwhile, the present government has no intention of selling off the three small 'Polfas' still controlled by the State Treasury either. As a Treasury spokesperson confirmed last week, the government still plans to merge better-performing Polfa Warszawa and Polfa Pabianice with debt-ridden and trade-union-gripped Polfa Tarchomin. And though there is talk of later issuing around a third of the holding's stock on the WSE, the possible attraction, for any strategic investor, of a minority stake in the resulting government owned entity, is not hard to assess.
The next government, may, of course have a different approach. But for the moment at least, all ambitions are likely to be centered on Kutno and Jelfa.
"I wouldn't be surprised," says Tomasz Bardziłowski, "if the final bids were higher than zł.325."
Other analysts, however, have reputedly mentioned even higher sums.
