Portuguese set to remove last objection to Deutsche takeover
At last Deutsche Bank appears to have won the year-long tug of war for control of BIG Bank Gdanski (BIG BG) after Banco Comercial Portugues (BCP) last week seemed ready to divest of its 15% stake in the disputed bank.
Early last week BCP withdrew its call for an extraordinary shareholders meeting scheduled for March 10, and entered into negotiations with Deutsche. Banking analysts said the move indicates that BCP is now on the verge of pulling out of BIG BG.
"The most likely scenario is that BCP will sell its BIG BG stake to Deutsche," said Marek Juras, an analyst at Erste Securities Polska. "They'd also sell their stake in Millennium Bank," BIG BG's retail banking operation, in which BCP holds a 45% stake.
BCP officials would not confirm whether the bank is selling off its assets in BIG BG to its German rival. "BCP's chairman, Deutsche Bank's chairman and the other partners involved in BIG BG's operations are still talking," said Antonio Cunha Vaz, BCP's press spokesman. "Things haven't gone the way we expected but we want to be constructive and find a solution that satisfies everybody."
Deutsche officials refused to comment on the current status of the talks. "The only thing I can say is that the negotiations are ongoing and I will not comment beyond this," said Hubert Janiszewski, vice president of Deutsche Bank Polska.
Before the current twist in events, Deutsche and its allies were estimated to hold around 48% in Poland's fifth largest bank. BCP, pan-European insurer Eureko and other allies of BIG BG's management were reported to hold around 40%, while insurer Powszechny Zaklad Ubezpieczen (PZU) holds 5.6% and the remainder is floated on the Warsaw Stock Exchange (WSE).
Analysts said Deutsche and its allies were waiting for the green light to purchase PZU's stake in BIG BG. But that sale is on ice at present while a Warsaw regional court decides whether PZU has the right to divest of its stake, after it signed a "secret" deal with Deutsche promising to sell its shares to the German bank.
But if BCP throws in the towel, the way is open for Deutsche to take full control. "It's now a straight struggle and my feeling is Deutsche will win out," said a London-based analyst, pointing to Deutsche's determination to get ahold of BIG BG as evidence. "If BCP called the shareholders meeting off, it suggests they're not thinking of getting control and are selling the stake for as much as possible."
However, it was not clear whether BCP will divest of its stake in Millennium should it decide to sell its holdings in BIG BG to Deutsche. Cunha Vaz said that BCP's core involvement in Poland has so far been in the retail bank's operations and as a 16% shareholder in Eureko, which in turn has been involved in the insurance business as a 20% shareholder in PZU since November. "These are strategic investments and are not questions of making fast money," he said.
BCP now holds up to 45% in Millennium Bank while BIG BG holds the rest. Artur Szeski, an analyst at CDM Pekao Securities, said Deutsche's previous announcements that its interests lie less in BIG BG's retail but commercial operations indicate it is possible BCP will swap its stake in BIG BG for Deutsche's stake in Millennium. But Millennium is now going through a restructuring process and complicated legal processes might hinder any change in its ownership structure, Szeski said.
At the same time, Juras said it is unlikely such a move will come about, and BCP could well clear out of Millennium altogether. BCP's retail banking operations in other countries has so far entailed a relationship with a strong local partner who has a majority position while the Portuguese bank provides its expertise and know-how, he said. While BCP has the right to buy the remaining 55% stake in Millennium in the event of BIG BG being taken over, it would need local support and may not be willing to hold a 100% stake, Juras said.
Furthermore, the option of BCP and Deutsche collaborating together in Millennium is also unlikely, he said. While the German bank does not fit the pattern of BCP's ideal partner, Deutsche's own expertise in retail could well overshadow the Portuguese bank. "Deutsche is a really strong, experienced bank in this field, and there would be no necessity for BCP," Juras said.
Another possibility is that BCP hangs onto its stake in Millennium and tries to find a Polish partner eager to make its way into retail banking, he said. However, local banks with the requisite clout to do so are few and far between, while potential candidates, such as BRE Bank, would entail similar foreign ownership problems to the current scenario in BIG BG, Juras said. German bank Commerzbank owns a 49% stake in BRE Bank.
Analysts said the possibility of BCP pulling out also has implications for Eureko. "Everything is now getting to the point where Eureko should reconsider its investment" in BIG BG, Szeski said."
