Italian pharmaceutical concern Recordati, plays its cards on the local scene
Italian pharmaceutical concern Recordati, which only last month was competing with Polfa-Kutno for a stake in Jelfa, has now suddenly begun applying its attentions to Kutno itself, with a bid for a 49.99 percent share. A curiously neat solution for all three seems in sight, but everything depends on the shareholders and the government.
When Kutno announced its bid for the Treasury's share of Jelfa last month, Kutno's management stressed the significant leap in market share that a consequent merger could bring both firms (which have many shareholders in common). Jelfa's management, however, seemed less than captivated by the prospect of merging with Kutno, reacting to the news by pointedly stressing the advantages of an EU or U.S. investor. Whereupon came press reports that there were indeed as many as five Western suitors for Jelfa's hand, among them, an Italian company now identified as Recordati. Share prices for Jelfa began to climb.
Director of Kutno, Janusz Guy, then began to stress that the company wasn't going to hold out for Jelfa at all costs: the offer was valid only until the end of March, and the price was also pertinent, he said. Share prices for Kutno, consequently, began to fall.
Recordati's surprise bid for Kutno, in early April, has since turned the situation right around. Kutno shares are now well on the up. But the biggest question is: How does this all relate to Jelfa? Giovanni Recordati, president and CEO of the Recordati group, declines to comment on how this news relates to the Italian company's own Jelfa bid. He does affirm, however, that he expects the prospect of a Kutno-Jelfa merger to exert some influence on negotiations with Kutno's shareholders. "We will discuss Kutno's plans and will be supportive of the management's strategy, if conducive to the growth of Kutno, at the right price," he says. In view of the fact that three financial institutions - which together hold one third of Jelfa's shares - also hold a combined two-thirds of Kutno, "We speculate that Kutno's shareholders will sell up part of their share in the company, but also retain part, with a view to Kutno's potential acquisition of Jelfa," he added.
Kutno, meanwhile, despite an earlier announcement that its bid for Jelfa was valid only till the end of March, has now extended its offer indefinitely. It looks, then, as if the answer to everyone's dreams could be in sight. Jelfa could conceivably get its foreign investor together with access to Western product pipelines, know-how and experience on the EU licensing market. Kutno could get Jelfa plus all these, while Recordati could get two chunks of the Polish market in - almost - just one go.
According to analysts, though, it's unlikely to be that simple.
"I doubt that Kutno's shareholders are satisfied with the price offered by Recordati," says Tomasz Bardziłowski, analyst at DM BZ WBK. "You have to remember that Recordati considered buying Kutno from its previous owners, Enterprise Investors, who were offering a 70 percent piece or nothing. Even though the current price they're offering is higher, in total they would be paying a smaller amount than at that time."
In his view, this is especially true in view of the fact that Kutno might now get other bidders. "If there really are six interested in Jelfa, it's likely there'll be more interest in Kutno, which is, objectively, a much more attractive buy."
Meanwhile, if Kutno's bid for Jelfa does win out, taking control of the new merged company could, for Recordati, mean paying another high premium. Since this is the Italian concern's third attempt to break into the domestic pharmaceutical market, it seems likely that they won't give up too easily on getting control of Kutno, at least. Press reports from early April quote Mr Recordati as stating that the company does not, in fact, rule out a raise on the offered price.
Whether they'll be prepared to pay a further high premium for control of Jelfa is, however, a different question altogether. The Italian message to both Kutno and Jelfa's shareholders seems to be - at least for the moment - not to push it too far.
"Kutno is a good company, and we want to invest in it," says Giovanni Recordati, "with or without Jelfa."
When Kutno announced its bid for the Treasury's share of Jelfa last month, Kutno's management stressed the significant leap in market share that a consequent merger could bring both firms (which have many shareholders in common). Jelfa's management, however, seemed less than captivated by the prospect of merging with Kutno, reacting to the news by pointedly stressing the advantages of an EU or U.S. investor. Whereupon came press reports that there were indeed as many as five Western suitors for Jelfa's hand, among them, an Italian company now identified as Recordati. Share prices for Jelfa began to climb.
Director of Kutno, Janusz Guy, then began to stress that the company wasn't going to hold out for Jelfa at all costs: the offer was valid only until the end of March, and the price was also pertinent, he said. Share prices for Kutno, consequently, began to fall.
Recordati's surprise bid for Kutno, in early April, has since turned the situation right around. Kutno shares are now well on the up. But the biggest question is: How does this all relate to Jelfa? Giovanni Recordati, president and CEO of the Recordati group, declines to comment on how this news relates to the Italian company's own Jelfa bid. He does affirm, however, that he expects the prospect of a Kutno-Jelfa merger to exert some influence on negotiations with Kutno's shareholders. "We will discuss Kutno's plans and will be supportive of the management's strategy, if conducive to the growth of Kutno, at the right price," he says. In view of the fact that three financial institutions - which together hold one third of Jelfa's shares - also hold a combined two-thirds of Kutno, "We speculate that Kutno's shareholders will sell up part of their share in the company, but also retain part, with a view to Kutno's potential acquisition of Jelfa," he added.
Kutno, meanwhile, despite an earlier announcement that its bid for Jelfa was valid only till the end of March, has now extended its offer indefinitely. It looks, then, as if the answer to everyone's dreams could be in sight. Jelfa could conceivably get its foreign investor together with access to Western product pipelines, know-how and experience on the EU licensing market. Kutno could get Jelfa plus all these, while Recordati could get two chunks of the Polish market in - almost - just one go.
According to analysts, though, it's unlikely to be that simple.
"I doubt that Kutno's shareholders are satisfied with the price offered by Recordati," says Tomasz Bardziłowski, analyst at DM BZ WBK. "You have to remember that Recordati considered buying Kutno from its previous owners, Enterprise Investors, who were offering a 70 percent piece or nothing. Even though the current price they're offering is higher, in total they would be paying a smaller amount than at that time."
In his view, this is especially true in view of the fact that Kutno might now get other bidders. "If there really are six interested in Jelfa, it's likely there'll be more interest in Kutno, which is, objectively, a much more attractive buy."
Meanwhile, if Kutno's bid for Jelfa does win out, taking control of the new merged company could, for Recordati, mean paying another high premium. Since this is the Italian concern's third attempt to break into the domestic pharmaceutical market, it seems likely that they won't give up too easily on getting control of Kutno, at least. Press reports from early April quote Mr Recordati as stating that the company does not, in fact, rule out a raise on the offered price.
Whether they'll be prepared to pay a further high premium for control of Jelfa is, however, a different question altogether. The Italian message to both Kutno and Jelfa's shareholders seems to be - at least for the moment - not to push it too far.
"Kutno is a good company, and we want to invest in it," says Giovanni Recordati, "with or without Jelfa."
