KPW asks for changes in Pekao prospectus

The KPW has asked Bank Pekao to supplement a prospectus section dealing with its strategy, confirmed Maciej Chojnacki, a spokesman for the Treasury Ministry.
The commission believed the strategy outlined in Pekao's offering documents applied to the bank's owner, the Treasury Ministry, and not the bank itself, according to sources close to the bank.
The requested revision is one reason why Bank Pekao's newly appointed president, Maria Wisniewska, has decided on a drastic move - to fully merge the four banks that make up the Pekao group at the same time the privatization process is under way, sources said.
Wisniewska last week asked for the resignation of the presidents of the other three banks, which Bank Pekao owns.
The banking group, when taken as a whole, is the largest in Poland with nearly zl. 55 billion ($15.7 billion) in total assets. The group has book value of about zl. 1.4 billion ($400 million), according to analysts' estimates.
Sources said Wisniewska asked for the resignations to ease the way for the merger, which the individual executives were expected to oppose. When the three banks were originally brought under Bank Pekao's control in a 1996 consolidation scheme, it was envisioned that each would maintain its identity.
The Pekao banking group is composed of Bank Depozytowo-Kredytowy (BDK) in Lublin, Pomorski Bank Kredytowy (PBKS) in Szczecin, Powszechny Bank Gospodarczy (PBG) in lodz and Warsaw-based Bank Pekao, which has a 100% stake in the each of the banks.
While analysts agreed that a merger of the banks is inevitable and makes sense from an investment viewpoint, those involved with the upcoming sale said such a merger may be difficult to undertake in the midst of a large-scale privatization.
The Treasury Ministry is hoping to sell 15% of Bank Pekao through an initial public offering (IPO) scheduled to take place in June. It then wants to sell a further 35% to a strategic investor by the end of the year.
According to a report released by CDM Pekao Securities in late February, Bank Pekao could have a value of zl. 3.5 billion ($1 billion), meaning the IPO could fetch around zl. 525 million ($150 million).
However, further revisions to the prospectus and the uncertainty a restructuring may generate could wreak havoc with this timeline, executives connected to the bank said.
"I'm sure that under the circumstances the privatization is impossible this year," said a source close to the deal. "There is the time factor to be considered, and the Securities Commission (KPW) has its own schedules that can't be sped up."
Miroslaw Kachniewski, public relations deputy director at the Securities Commission (KPW), refused to comment on Pekao's offering document, saying it was against the commission's policy to speak about prospectuses under consideration.
But Pekao is confident the privatization can proceed on schedule, even with a restructuring taking place. And the bank's management believes that a merger will present a better value for investors.
"A group where each bank competes with the others is very unclear to potential investors," said Leszek Pawlowicz, a Pekao supervisory board member. "And any investor will be more inclined to buy a bank that has already taken some steps to change it."
He is also convinced that it will be possible to carry out the merger and privatization at the same time. But Pawlowicz admitted the plan could be derailed, especially if political problems crop up due to regional interests of the three other banks involved.
"I realize that the respective management boards will be against the merger," Pawlowicz said. "And it's also possible that they might win."
Pekao's privatization process began in December 1997 when it submitted its prospectus to the KPW. The IPO was scheduled to take place in March 1998 but was delayed when then-president Andrzej Dorosz was replaced with Wisniewska. This required changes to the prospectus, which pushed back the IPO to June.
Because the bank missed the March target, the prospectus had to be further revised to include full-year 1997 financial figures. The original copy only included information for the first three quarters of the year.
Now, though, to meet the June deadline, the bank must submit the full-year results by April 20. Although the bank and its advisers have said there will be no further delay, the three subsidiary banks have been asked to begin compiling results for the first quarter of 1998 for possible inclusion in the prospectus, sources said.
Combining a full-scale restructuring with the privatization could pose more problems and delays.
"We might ask the question of what's going to be sold," a source said. "One bank or four banks? This is a completely different story and one plus one doesn't not always equal two."
Pekao's IPO is one of two major share sales the government has planned for this year; the other is the sale of 15-20% of telecom monopolist Telekomunikacja Polska SA (TPSA).