Citi closer to Handlowy takeover
Bank Handlowy moved one step closer to being sold to Citigroup last week when insurer Powszechny Zaklad Ubezpieczen (PZU) agreed to sell its shares in the Polish bank to the U.S. financial giant.
At the same time, a long-talked about merger between Handlowy and BRE Bank drew its last breath. Handlowy will now likely merge with Citigroup's Polish operations.
Citigroup must now secure permission from the Banking Supervision Commission (KNB) and the Securities and Exchange Commission (KPWiG) to take over Handlowy. Citigroup has already applied for a permit to acquire up to 75% of Handlowy's shares.
The agreement with PZU gives Citigroup control of a 10% stake in Handlowy plus an additional 23% of shares through convertible bonds. Analysts last week said PZU was rumored to sell its shares for about zl. 70-zl. 74 each. Handlowy closed Friday at zl. 75 a share, up 5.6% from the previous week.
A joining of Citigroup's Polish operations and Handlowy would create the third-largest bank on this market with total assets of zl. 27.5 billion ($6.87 billion).
Analysts said that Citigroup should encounter little difficulty in taking control of the bank, as Germany's Commerzbank already said it would also sell its 10% stake to Citigroup. That transaction also received an approval by Handlowy's stable of investors, which includes Zurich Insurance, JP Morgan and Swedbank. Those investors combined hold almost 30% of Handlowy.
"What does it mean for Handlowy? Well, Handlowy, from a very conservative bank, will transform into a very aggressive one," said Marek Juras, a banking analyst with Erste Securities Polska. "And it will stop losing its market share in corporate banking."
Analysts also said that it is unlikely Handlowy will lose its identity on the Polish market as a result of the takeover. "Citi has a reputation of being an aggressive investor that tries to merge everything under its own logo," said Artur Szeski, a banking analyst with CDM Pekao Securities. "But the decision about the brand name is a business one and Citi might decide Handlowy's brand is too strong to get rid of it."
On the other hand, Citibank (Poland) has already built a strong presence on the Polish market, Szeski added. "So maybe for a while they would run two operations," he said. "Well, it's still too early to say."
Citigroup stepped into the picture after shareholder opposition caused a proposed merger between Handlowy and BRE Bank to unravel.
