Eureko and PZU tight-lipped about government's actions

Insurance giants Eureko and Powszechny Zakład Ubezpieczeń (PZU) are keeping quiet following comments from Treasury Minister Wiesław Kaczmarek indicating he will allow time to run out on a deal to privatize Poland's largest insurer.

Kaczmarek last week told Reuters he would not extend an end-of-year deadline for Eureko to get the permits it needs before it can take a majority stake in PZU.

"We've adopted an approach for now that we will not comment on this," said Michał Nastula, assistant director at pan-European insurance group Eureko. PZU spokesman Adam Taukert also declined comment.

The potential snag in the deal reopens what had been a festering dispute between a Eureko-led consortium and the government over control and ownership of the Polish company. Eureko and BIG Bank Gdański bought into PZU in November 1999, paying zł. 3 billion ($732 million) for a 30% stake in the country's dominant insurance firm. The agreement quickly unraveled through backroom dealings and overt power plays that saw the treasury, which oversees privatizations, kick the Netherlands-based firm's representatives off PZU's supervisory and management boards. But, following a change at the treasury, a new minister and Eureko in April patched up the deal and agreed to allow the consortium to take its seats in management and add 21% to its holding by buying in at zł. 153 per share.

That additional 21% stake, which would give the consortium a majority, now appears likely to stay in government hands, at least for the time being. The agreement requires that either Eureko receive a land permit from the Ministry of Internal Affairs and Administration (MSWiA) or that the Securities and Exchange Commission (KPWiG) approve PZU's offering prospectus, making it a public company, according to a Eureko official.

The land permit process is bureaucratic and could take months. For the prospectus to go before the KPWiG, the treasury minister must sign off on it. Either way, it appears that the end-2001 deadline will pass before the consortium gets the approval it needs to take a majority stake in the firm.

"That is the situation at the moment," Nastula said last week.

Kaczmarek, who took over as treasury minister following his party's September election win, told Reuters that procedural obstacles would probably prevent the deal going through and he would do nothing to lift administrative barriers to the sale.

"I do not expect the deadline to be extended," Kaczmarek told the news service. The deal was signed with a condition and if it is fulfilled, then the agreement would come into force."

The PZU saga had escalated into several lawsuits, a complaint to the European Union (EU) and damaged Poland's reputation among international investors. All legal claims and complaints were dropped and, in the meantime, PZU managed to maintain its more than 50% share of the Polish insurance market. The company was also enthusiastically pursuing an initial public offering (IPO), originally scheduled for this year, but later postponed because of poor market conditions and other factors.

Eureko and PZU officials did not indicate what their next step would be.

Jeff Sparshott