Pol-Aqua buys stake in Polnord

WSE-listed construction company Pol-Aqua has signed an agreement for the purchase of 20 percent of shares in Polnord, a developer controlled by Polish tycoon Ryszard Krauze's Prokom Investments. The transaction is worth zł.400 million, at zł.112.26 per share, and will be financed through loans.

This transaction may be followed by the merger of Pol-Aqua and Polnord, according to Marek Stefański, Pol-Aqua's CEO and majority shareholder. "We've presented Polnord an offer [to merge] and will wait for 60 days," he said. If Polnord's investors reject the offer, however, Pol-Aqua will give up the purchase of the 20-percent stake.

The merger would result in the emergence of a Warsaw bourse heavyweight, Stefański said. "We have gone from small to big, and now we want to compete with the biggest companies."

However, the share prices of both companies dropped following the announcement of the merger offer. According to an analyst from a major Warsaw brokerage who asked not to be named, the plans for merger were not well received.

"The transaction would involve Pol-Aqua taking loans, and might mean an increase in operational costs," the analyst told WBJ.

Still, Stefański said that there were good opportunities for synergy. Polnord, a developer, has 400 apartments currently under construction in Poland as well as 215,000 sqm of commercial space. In Russia, it is developing a total of 87,500 sqm of commercial and residential space. Polnord also has the largest land bank of any developer in Poland, reaching 1.4 million sqm.

Pol-Aqua is a general contractor in the residential and commercial sectors and also offers engineering, road and pipeline services. General contracting brought the company revenues of zł.285 million last year.

Pol-Aqua estimates that Polnord will bring in zł.200 million in net profit this year. For its part, Pol-Aqua forecasts that it will earn zł.1.42 billion in revenue and an EBITDA of zł.162 million in 2008.