Court injunction could complicate BIG BG takeover
A court order last week blocking shareholder Powszechny Zaklad Ubezpieczen (PZU) from selling its 8.6% stake in BIG Bank Gdanski to Deutsche Bank could put a few kinks in the German bank's takeover plans.
The court last Thursday answered BIG BG's management request to stop the sale by issuing an injunction. The order came two days after investment bank Wood & Co., a Deutsche ally, bought 3% of PZU's stake from one of the insurer's subsidiaries, PZU Zycie.
The injunction marks the latest event in Deutsche's ongoing effort to takeover BIG BG by force. Analysts last week said that while the court order in no way boxes out Deutsche from taking control of the Polish bank, it does open up the possibility that PZU could sell its packet to a third party. The entrance of a hostile third party, such as Banco Comercial Portugues, which with a host of other shareholders already controls 40% of BIG BG, could start a bidding war, analysts said.
PZU's shares lay in the balance. Obtaining the shares would help Deutsche Bank secure its hold on BIG BG. "The question mark is now over the next 5.6%," said Marek Juras, an analyst at Erste Securities Polska. "There can be no transaction between Deutsche Bank and PZU, but there could be another transaction between PZU and someone else."
Deutsche Bank surprised BIG BG's management and many shareholders at the end of January when it almost gained control of the Polish bank by voting in bloc with PZU and a host of other shareholders. That move put BIG BG's management on the defensive. After learning that PZU had previously agreed to sell its entire stake to Deutsche Bank before the meeting had even occurred, executives in the Polish bank shut down the meeting and on Feb. 10 asked the Warsaw district court to block the sale.
Analysts last week were unsure whether the court's decision would reverse the deal between Wood & Co. and PZU Zycie, and whether that deal was legally binding. BIG BG said that PZU President Wladyslaw Jamrozy had concealed both the negotiations and the signing of the deal with Deutsche Bank, causing significant damage to the BIG BG and acting against PZU's interests as a member of the bank's supervisory board.
"The court decision suspends all decisions on the PZU and PZU Zycie shares according to the agreement with Deutsche," said Artur Szeski, an analyst at CDM Pekao Securities. "Deutsche is now in a less favorable situation because there is a place for another bidder."
While analysts were unsure as to how much Deutsche currently owns in the disputed bank, it has a permit to hold up to 25% of shares in BIG BG and recently applied to up that stake to 33%. In concert with other financial institutions, Deutsche Bank effectively controls more than 40% of BIG BG. But after the transaction between Wood & Co. and PZU Zycie, it is likely Deutsche Bank has more than 50%, Szeski said.
At the same time, acting in concert with PZU Zycie, Deutsche Bank currently controls 10 seats on BIG BG's disputed 19-member supervisory board. A meeting is scheduled March 10 to decide the board's future. One of the outcomes of the first shareholders meeting was that Deutsche Bank and BIG BG created two separate supervisory boards.
Analysts said that any number of Deutsche allies could purchase the remainder of PZU's stake in BIG BG. These include Swiss banks Julius Baer & Co., Union Bancaire Privee and J. Vontobel & Co., as well as Wood & Co., which each hold stakes of 3-4%. "Certainly a Swiss asset-management company would be the obvious candidate," said a London-based analyst who wished to remain unnamed.
However, the analyst added that Deutsche Bank's rivals can just as easily sweep in to take the disputed 5.6% stake. These include BCP, pan-European insurer Eureko, TBM Leasing and INEC Services, which combined with smaller shareholders control around 40% and so far have sided with BIG BG's management in attempting to block Deutsche's takeover bid.
"It does help BCP," which in concert with Eureko is reported to be the most interested party in taking the PZU stake, the London-based analyst said. "That stake is back in play now and there's nothing to stop them from buying it."
Last week, BCP reportedly was offering around zl. 20 per share for PZU's stake. According to the agreement between Deutsche and PZU, the shares were to change hands at zl. 10. But last week Wood & Co. paid zl. 14 in its transaction with PZU Zycie. BIG BG's shares closed at zl. 15.8 on Friday.
At the same time, PZU was thrown into deeper water with the threat of further legal action. The Securities and Exchange Commission (KPWiG) accused PZU Zycie of hiding the deal to sell its 5% stake in BIG BG to Deutsche and said it was obliged by law to reveal the agreement to bank shareholders.
PZU countered that it had not been aware that it had to inform KPWiG of the deal, which was signed a day before the government completed the first step in the insurer's privatization. The government last November sold a 30% stake in PZU to Eureko and BIG BG, with the European insurer taking 20% and the Polish bank 10%.
A lawyer at an international Warsaw-based law firm, who wished to remain unnamed, said PZU's argument "doesn't sound very convincing, does it? If I were their legal adviser, I'd certainly write a letter advising them to inform (the Treasury Ministry and their shareholders)."
What advice the ministry and PZU's law firm, Weil Gotshal & Manges, provided about the transaction is unknown.
In addition, both BIG BG and Eureko have gone to the courts to block PZU. Eureko will try to block the transfer of PZU shares to Deutsche Bank and is considering taking civil action against the individuals involved in the deal, said Lorrie Morgan, press spokeswoman for Eureko.
"We can assume they should have known these things and I believe they should have informed us of this deal," she said. "Technically they may have been within their right to do so ... but it was acting in bad faith in not disclosing the material fact to us."
