ITI Group issue offers novelty at a price

Media firm ITI Group, set to become Eastern Europe's first listed television and cinema group, priced its share offering higher than expectations last week but cut its size to cushion against weak demand. ITI reduced its offer to up to 42% of its shares from 48% in Poland's largest issue in two years, which comes as the key WIG20 index hovers near six-month lows. The group, whose complex holding structure has tempered the enthusiasm of some investors, set its issue price range at zł. 9.75, 14 per share, which would value the group at $546 million-$795 million if all new shares were taken up. This would rank ITI behind Polish newspaper and radio group Agora, whose market capitalization stands at $770 million. But analysts, who estimated ITI's value at about $500 million, said the eventual capitalization of the group would likely be lower since some of its bondholders, at whom part of the offering is targeted, agreed not to convert their bonds into shares. "This price range seems quite optimistic, but maybe management had reasons for such levels after meetings with foreign investors," said Grzegorz Gonda, an analyst at Kredyt Bank brokerage in Warsaw. "The price is high, but the market will likely absorb ITI's shares if the final price is close to the lower end of the range," said one Warsaw-based fund manager. ITI previously cut its offer to no more than 95.7 million shares from 110.6 million after its current shareholders decided to reduce the offering of their own stock to 27.3 million from 42.2 million shares. ITI did not explain its decision to reduce the offering.

Domestic and foreign players are offered 55.9 million shares, which includes those sold by current owners and 28.6 million new shares. They can sign up for the offer until July 2. A further 33.5 million shares have been allocated to holders of convertible bonds and 6.3 million have been reserved for the firm's management. ITI, which is already listed on the Luxembourg stock exchange, plans to gain $75 million-$130 million through its Warsaw flotation in mid-July, but analysts said ownership structure concerns may cloud the hyped-up offer. Recently, ITI agreed to buy back a 33% stake in its flagship TVN television network from SBS Broadcasting for $150 million. The remaining 67% of TVN is owned by a company in which ITI holds 49% and TVN's founders control 51%. To make things more complicated, TVN's founders are also the main owners of the ITI Group, fueling concern that ITI shareholders may not be able to control the group's key asset, which has a 25% share of the Polish TV advertising market. Analysts said an additional concern may be the risk that BRE Bank, which has a 15.2% stake of ITI, but decided to reduce it by half in the offering, may want to sell the remaining shares in the firm soon, depressing its share price. "BRE's decision to reduce its stake through the flotation confirms that the bank does not treat ITI as a long-term investment," said Magdalena Łapsa of SG Securities. BRE was not available for comment.

BZ WBK sees higher profitability Bank Zachodni WBK, the Warsaw Stock Exchange's fifth-largest listed lender, said last week that it should boost profits this year as synergies from its merger last year offset a sharp economic slowdown. Chief Executive Officer Jacek Kseń said the bank, a unit of Allied Irish Banks (AIB), wanted to raise its return on equity ratio (ROE) - a key measure of profitability - to around 12-17% this year from 9% in 2001. The bank, created last year from a merger of two AIB units, was a favorite bank issue this year with its shares up more than 50% to a record of about zł. 80 in mid-April, thanks to improved earnings and strong growth potential. "Our first-quarter results are very encouraging, and they show that the merger, which was a difficult process, is now a success," Kseń said. BZ WBK shares fell recently amid shrinking valuations in the heavyweight sector as investors became concerned that the collapse of Poland's second-largest shipyard, Szczecin Shipyard, could send shockwaves across the industry. While many banks suffered severely due to sluggish loan growth and hefty bad loan provisioning, BZ WBK saw its group earnings surge 85% to zł. 72 million ($18 million) in the first quarter of the year. - Reuters