Privatization fund managers won't step down
Narodowy Fundusz Inwestycyjny Octava, a privatization fund managed by Copernicus Capital Partners, has announced a buy-back of half of its shares at a premium to the market price. Octava was the first privatization fund to embark on the way to liquidation back in 2001, when it secured a right to buy its own shares.
"The buy-back process will begin once the shares bought previously have been formally discontinued," says Paweł Gieryński, Copernicus' president. It is expected to happen within the next few weeks. The company is to spend zł.140 million (€30.7 million), raised from sales of its portfolio companies, paying zł.13.51 per share (€2.9), at a premium of more than a third to the market price. Once the Securities and Exchange Commission (KPWiG) has given permission for the fund to increase its stake to more than 33 percent, Octava will buy back more shares, though at a lower price, likely to be around zł.11 (€2.4).
Gieryński predicts that even such a hefty premium may not lure some of the shareholders into disposing of their stakes in the fund. Copernicus plans, therefore, to continue the fund's activity by shifting to real-estate investments. The fund is currently engaged in two such projects, a residential development in Warsaw and the Galeria Legnicka shopping mall in Wrocław.
The future of other NFIs is less clear. Copernicus runs NFI Piast, in addition to Octava, and is also looking to change its profile. This year, NFI Piast offered other privatization funds its shares in exchange for minority stakes they hold in around 100 companies that are now controlled by strategic investors. These stakes would then have been bundled together and sold to financial investors. The plan has, however, fallen flat as funds failed to reach agreement on the price of their assets. No alternative plan for the fund, whose portfolio of three companies includes two bankrupt firms, has yet been devised. Gieryński says, however, that the fund could continue to function as a restructuring vehicle. Its current market value of zł.23.4 million (€5.1 million) stands significantly below its book value of more than zł.87.8 million (€19.2).
Another fund that announced its intention to discontinue some of its shares is 7NFI im. Kazimierza Wielkiego. The fund has acquired more than 25 percent of its shares over the course of the last two years. The firm said at the time that it would re-sell the shares at a later date. As it turns out, those who doubted 7NFI's stated reason have been proven right.
Ballinger Capital is another privatization fund management company looking to withdraw from the business, ten years after NFIs were founded as part of a universal privatization program. The company is planning to use funds raised from the sale of its assets to launch a private equity fund. The company currently manages three privatization funds, though the date for their liquidation has not yet been given.
Janusz Lewandowski, the architect of the universal privatization program, which was launched in 1993 with the creation of the twelve NFIs, when asked of the funds' future said, "There is none. They no longer make any sense." The fund management firms, which he describes as the program's "sole beneficiaries," clearly do not share that assessment.
"The buy-back process will begin once the shares bought previously have been formally discontinued," says Paweł Gieryński, Copernicus' president. It is expected to happen within the next few weeks. The company is to spend zł.140 million (€30.7 million), raised from sales of its portfolio companies, paying zł.13.51 per share (€2.9), at a premium of more than a third to the market price. Once the Securities and Exchange Commission (KPWiG) has given permission for the fund to increase its stake to more than 33 percent, Octava will buy back more shares, though at a lower price, likely to be around zł.11 (€2.4).
Gieryński predicts that even such a hefty premium may not lure some of the shareholders into disposing of their stakes in the fund. Copernicus plans, therefore, to continue the fund's activity by shifting to real-estate investments. The fund is currently engaged in two such projects, a residential development in Warsaw and the Galeria Legnicka shopping mall in Wrocław.
The future of other NFIs is less clear. Copernicus runs NFI Piast, in addition to Octava, and is also looking to change its profile. This year, NFI Piast offered other privatization funds its shares in exchange for minority stakes they hold in around 100 companies that are now controlled by strategic investors. These stakes would then have been bundled together and sold to financial investors. The plan has, however, fallen flat as funds failed to reach agreement on the price of their assets. No alternative plan for the fund, whose portfolio of three companies includes two bankrupt firms, has yet been devised. Gieryński says, however, that the fund could continue to function as a restructuring vehicle. Its current market value of zł.23.4 million (€5.1 million) stands significantly below its book value of more than zł.87.8 million (€19.2).
Another fund that announced its intention to discontinue some of its shares is 7NFI im. Kazimierza Wielkiego. The fund has acquired more than 25 percent of its shares over the course of the last two years. The firm said at the time that it would re-sell the shares at a later date. As it turns out, those who doubted 7NFI's stated reason have been proven right.
Ballinger Capital is another privatization fund management company looking to withdraw from the business, ten years after NFIs were founded as part of a universal privatization program. The company is planning to use funds raised from the sale of its assets to launch a private equity fund. The company currently manages three privatization funds, though the date for their liquidation has not yet been given.
Janusz Lewandowski, the architect of the universal privatization program, which was launched in 1993 with the creation of the twelve NFIs, when asked of the funds' future said, "There is none. They no longer make any sense." The fund management firms, which he describes as the program's "sole beneficiaries," clearly do not share that assessment.
