More share moves at BIG BG leave Deutsche Bank in tight spot
Deutsche appeared to have been edged out of the running for a controlling stake in BIG Bank Gdański (BIG BG) after slightly more than 12% of the bank was sold to friendly investors Banco Commercial Portugues and Eureko.
"It was a successful defense against Deutsche," said Artur Szeski, a banking analyst with CDM Pekao Securities. "I can't imagine what Deutsche can do now."
Deutsche had jumped into the fray for control of BIG earlier this year when the bank became a takeover target.
However, BIG's management seemed to have rebuffed its advances and Deutsche has been left waiting for permission from the Banking Supervision Commission to increase its stake above 10%.
The battle for BIG erupted when investors tried to wrest control of 24% of the bank from management. The shares were technically owned by BIG subsidiaries but controlled by the management board. In February, minority shareholders Templeton Global Investors and ABN Amro proposed a motion to transfer the right to control these shares from the management board to all shareholders.
Many saw this as an opening for a strategic investor to emerge within BIG because an investor who had a majority of votes at a shareholders meeting could then control the 24.29% holding. But BIG's management defeated this resolution and investors who had circled the bank bailed out, often selling their shares for a handsome profit. One challenger, BRE Bank managed to sell its 9.9% holding, reportedly acquired for zł. 5-zł. 9 a share, to RZB Central European Development for zł. 12 a share.
Deutsche, however, held onto its 9.9% holding in BIG, hoping to receive permission to buy up to 25% of the bank. With the sale of the treasury shares to BCP and international banking and insurance company Eureko, Deutsche now appears to be left as one of three stable investors rather than a possible acquirer. Deutsche can't acquire more voting rights in the bank unless it receives permission from the Banking Supervisory Commission. But even if it does, analysts believe it will not be able to acquire a controlling stake.
"They will probably get the permission, but then what for?" Szeski asked. "To become one of three stable investors?"
Currently, BCP and Eureko could control about 30% of the bank. BCP has permission to acquire up to 20% and Eureko up to 10%. Analysts believe the two friendly investors are probably nearing these levels.
In addition, insurer Powszechny Zakład Ubezpieczeń (PZU) holds 8%. Eureko, BIG and Bank of America have formed a consortium to bid for PZU in that company's privatization, raising the possibility of friendly cross-shareholdings.
Finally, BIG's management controls 12% of the treasury shares. This means that management, BCP, Eureko and PZU would be able to block Deutsche even if it acquires voting rights of up to 25%.
Although BIG's management clearly rebuffed Deutsche's attempts to become a strategic investor, the bank said it isn't averse to having another stable investor.
"We are ready to cooperate with everybody, provided our conditions are accepted," said Wojciech Kaczorowski, public relations director at BIG. The bank wants its stable investors to keep their combined holdings below 50% and to maintain the bank's Polish identity, he added.
"We don't want the bank's interests to be subordinated to the global interests of a strategic investor," he added.
The question is whether Deutsche is ready to accept such a diminished role. And if it is not, is Deutsche ready to take a loss on its nearly 10% holding in BIG, which was acquired at a variety of prices some of which went as high as zł. 12.50 per share.
"On average, they bought at zł. 10 per share," said Marek Jura¶, a banking analyst with Erste Securities Polska. "Nobody will pay this price now."
BIG traded on the Warsaw Stock Exchange (WSE) Friday at zł. 8 per share.
While BIG tries to find a spot on the Polish market, another German bank, Bayerische HypoVereinsbank, last week solidified its spot. The German bank announced that a tender to increase its 51% holding in Bank Przemysłowo-Handlowy (BPH) was successful. The bank now holds 77% of BPH and paid zł. 230 per share to minority investors who took part in the tender.
This was a particular success as some minority shareholders wanted a far higher price to reflect the zł. 480 per share Bayerische paid to the Treasury Ministry last fall for a 40% stake and zł. 430 a share it paid to the European Bank for Reconstruction and Development (EBRD) for a 9.9% stake in an off-market deal. At the time, BPH's market price was in the zł. 220 range. The current tender price of zł. 230 a share was 10% higher than BPH's average share price during the previous six months and was 14% higher than the share price on June 28, the last day before the tender was announced. Unhappy minority investors threatened to block a capital increase at BPH, which required 80% shareholder approval, if Bayerische didn't pay them a similar price to last fall's transactions.
Eventually, large minority shareholders such as Wielkopolski Bank Kredytowy (WBK) and Bank ¦l±ski with ING Bank agreed to sell their holdings. Altogether Bayerische bought 2.6 million shares in the tender, or 22.22% of the bank.
"Good job! I've heard some investors tried to negotiate but the Bavarians were tough," said Jura¶. "On the other hand, one couldn't hope for a better price."
This means this Monday's BPH shareholders meeting is likely to approve a zł. 527 million ($135 million) capital increase through an in-kind contribution of BHV's Polish operation - Vereinsbank Polska. Another unit, Hypo-Bank Polska, will also be brought in. After the capital increase, BPH's own capital will amount to zł. 2 billion ($513 million).
"It was a successful defense against Deutsche," said Artur Szeski, a banking analyst with CDM Pekao Securities. "I can't imagine what Deutsche can do now."
Deutsche had jumped into the fray for control of BIG earlier this year when the bank became a takeover target.
However, BIG's management seemed to have rebuffed its advances and Deutsche has been left waiting for permission from the Banking Supervision Commission to increase its stake above 10%.
The battle for BIG erupted when investors tried to wrest control of 24% of the bank from management. The shares were technically owned by BIG subsidiaries but controlled by the management board. In February, minority shareholders Templeton Global Investors and ABN Amro proposed a motion to transfer the right to control these shares from the management board to all shareholders.
Many saw this as an opening for a strategic investor to emerge within BIG because an investor who had a majority of votes at a shareholders meeting could then control the 24.29% holding. But BIG's management defeated this resolution and investors who had circled the bank bailed out, often selling their shares for a handsome profit. One challenger, BRE Bank managed to sell its 9.9% holding, reportedly acquired for zł. 5-zł. 9 a share, to RZB Central European Development for zł. 12 a share.
Deutsche, however, held onto its 9.9% holding in BIG, hoping to receive permission to buy up to 25% of the bank. With the sale of the treasury shares to BCP and international banking and insurance company Eureko, Deutsche now appears to be left as one of three stable investors rather than a possible acquirer. Deutsche can't acquire more voting rights in the bank unless it receives permission from the Banking Supervisory Commission. But even if it does, analysts believe it will not be able to acquire a controlling stake.
"They will probably get the permission, but then what for?" Szeski asked. "To become one of three stable investors?"
Currently, BCP and Eureko could control about 30% of the bank. BCP has permission to acquire up to 20% and Eureko up to 10%. Analysts believe the two friendly investors are probably nearing these levels.
In addition, insurer Powszechny Zakład Ubezpieczeń (PZU) holds 8%. Eureko, BIG and Bank of America have formed a consortium to bid for PZU in that company's privatization, raising the possibility of friendly cross-shareholdings.
Finally, BIG's management controls 12% of the treasury shares. This means that management, BCP, Eureko and PZU would be able to block Deutsche even if it acquires voting rights of up to 25%.
Although BIG's management clearly rebuffed Deutsche's attempts to become a strategic investor, the bank said it isn't averse to having another stable investor.
"We are ready to cooperate with everybody, provided our conditions are accepted," said Wojciech Kaczorowski, public relations director at BIG. The bank wants its stable investors to keep their combined holdings below 50% and to maintain the bank's Polish identity, he added.
"We don't want the bank's interests to be subordinated to the global interests of a strategic investor," he added.
The question is whether Deutsche is ready to accept such a diminished role. And if it is not, is Deutsche ready to take a loss on its nearly 10% holding in BIG, which was acquired at a variety of prices some of which went as high as zł. 12.50 per share.
"On average, they bought at zł. 10 per share," said Marek Jura¶, a banking analyst with Erste Securities Polska. "Nobody will pay this price now."
BIG traded on the Warsaw Stock Exchange (WSE) Friday at zł. 8 per share.
While BIG tries to find a spot on the Polish market, another German bank, Bayerische HypoVereinsbank, last week solidified its spot. The German bank announced that a tender to increase its 51% holding in Bank Przemysłowo-Handlowy (BPH) was successful. The bank now holds 77% of BPH and paid zł. 230 per share to minority investors who took part in the tender.
This was a particular success as some minority shareholders wanted a far higher price to reflect the zł. 480 per share Bayerische paid to the Treasury Ministry last fall for a 40% stake and zł. 430 a share it paid to the European Bank for Reconstruction and Development (EBRD) for a 9.9% stake in an off-market deal. At the time, BPH's market price was in the zł. 220 range. The current tender price of zł. 230 a share was 10% higher than BPH's average share price during the previous six months and was 14% higher than the share price on June 28, the last day before the tender was announced. Unhappy minority investors threatened to block a capital increase at BPH, which required 80% shareholder approval, if Bayerische didn't pay them a similar price to last fall's transactions.
Eventually, large minority shareholders such as Wielkopolski Bank Kredytowy (WBK) and Bank ¦l±ski with ING Bank agreed to sell their holdings. Altogether Bayerische bought 2.6 million shares in the tender, or 22.22% of the bank.
"Good job! I've heard some investors tried to negotiate but the Bavarians were tough," said Jura¶. "On the other hand, one couldn't hope for a better price."
This means this Monday's BPH shareholders meeting is likely to approve a zł. 527 million ($135 million) capital increase through an in-kind contribution of BHV's Polish operation - Vereinsbank Polska. Another unit, Hypo-Bank Polska, will also be brought in. After the capital increase, BPH's own capital will amount to zł. 2 billion ($513 million).
