Eureko deal on the rocks
The flotation of PZU, which must be completed by the end of June if the government wants to avoid a hefty fine, is in jeopardy, with parliament up in arms over the deal.
The government had negotiated an agreement with Dutch financial group Eureko, which owns 32 percent of the company. However, deputies have launched an investigation into an earlier sale of part of the insurer in 1999 and are unlikely to agree to the new compromise.
Treasury Minister Jacek Socha is now hoping to renegotiate the deal with Eureko and is due to meet the company's executive director, Ernst Jansen, on Wednesday.
The deal came about two months ago after the Dutch firm sued the government in an international arbitration court for breaking a promise to sell it a majority stake. The government then agreed to float PZU by the end of June. In exchange, Eureko said it would drop its demands for a majority holding in the firm.
This flotation would see 20 percent of the state's 55 percent stake in PZU on sale on the Warsaw bourse. The government also agreed to sell two further stakes of five percent each to Eureko and the European Bank for Reconstruction and Development.
The IPO, however, is looking increasingly unlikely. "It may turn out that we won't have time to carry out PZU's initial public offering [by end-June]," said Socha. "The IPO requires good preparation and peace ... it could be hurt by turmoil and its valuation could suffer.
"Eureko has declared itself to be a long-term investor. In the current situation it should also stop and ask itself whether clearing certain issues and waiting a few months more would not be favorable for the whole process."
Prime Minster Marek Belka supports this view. "The public offer is part of the deal with Eureko and it would be difficult to carry it out amid the eruption of hysteria," he said.
If the deal fails or is postponed, Poland may have to pay hefty damages to Eureko in the arbitration case and the disruption could land the government with a E1 (zł.4.08) billion bill. Eureko, which recently bought 10 percent of PZU from Bank Millennium, remains resolute in the face of this political storm. "I am not entirely surprised. I would be very foolish to be surprised by the unfolding of events," said its spokeswoman, Lorrie Morgan. She declined further comment until Socha officially presents his plans to Eureko on Wednesday.
PZU is Poland's leading insurer, manages assets worth $12 (zł.37.7) billion and is valued at $4.6 (zł.14.45) billion. Its privatization, one of the largest planned in Central Europe this year, is eagerly awaited by cash-rich local funds, which last year snapped up a large bulk of a $2.3 (zł.7.23) billion public offering of PKO Bank Polski. (Reuters)
The government had negotiated an agreement with Dutch financial group Eureko, which owns 32 percent of the company. However, deputies have launched an investigation into an earlier sale of part of the insurer in 1999 and are unlikely to agree to the new compromise.
Treasury Minister Jacek Socha is now hoping to renegotiate the deal with Eureko and is due to meet the company's executive director, Ernst Jansen, on Wednesday.
The deal came about two months ago after the Dutch firm sued the government in an international arbitration court for breaking a promise to sell it a majority stake. The government then agreed to float PZU by the end of June. In exchange, Eureko said it would drop its demands for a majority holding in the firm.
This flotation would see 20 percent of the state's 55 percent stake in PZU on sale on the Warsaw bourse. The government also agreed to sell two further stakes of five percent each to Eureko and the European Bank for Reconstruction and Development.
The IPO, however, is looking increasingly unlikely. "It may turn out that we won't have time to carry out PZU's initial public offering [by end-June]," said Socha. "The IPO requires good preparation and peace ... it could be hurt by turmoil and its valuation could suffer.
"Eureko has declared itself to be a long-term investor. In the current situation it should also stop and ask itself whether clearing certain issues and waiting a few months more would not be favorable for the whole process."
Prime Minster Marek Belka supports this view. "The public offer is part of the deal with Eureko and it would be difficult to carry it out amid the eruption of hysteria," he said.
If the deal fails or is postponed, Poland may have to pay hefty damages to Eureko in the arbitration case and the disruption could land the government with a E1 (zł.4.08) billion bill. Eureko, which recently bought 10 percent of PZU from Bank Millennium, remains resolute in the face of this political storm. "I am not entirely surprised. I would be very foolish to be surprised by the unfolding of events," said its spokeswoman, Lorrie Morgan. She declined further comment until Socha officially presents his plans to Eureko on Wednesday.
PZU is Poland's leading insurer, manages assets worth $12 (zł.37.7) billion and is valued at $4.6 (zł.14.45) billion. Its privatization, one of the largest planned in Central Europe this year, is eagerly awaited by cash-rich local funds, which last year snapped up a large bulk of a $2.3 (zł.7.23) billion public offering of PKO Bank Polski. (Reuters)
