PZU, Deutsche join forces to gain control of BIG BG
Insurer Powszechny Zaklad Ubezpieczen (PZU) again trumped the banking market last week by teaming up with Deutsche Bank in an attempt to take control of BIG Bank Gdanski's supervisory board during a shareholders' meeting last Friday.
From the very beginning of the meeting Friday, PZU astonished everyone present by voting in accordance with Deutsche Bank on every motion introduced. That lead most observers present, including BIG BG President Boguslaw Kott, to believe that PZU and Deutsche would try to put their own members on the bank's supervisory board a move that would later allow them to change the management. Places on the supervisory board were to be voted on later in the day, but at press time had not yet been discussed.
Together with investment funds that support it, Deutsche holds 46% of the voting rights in BIG BG. With PZU's 3.86%, Deutsche Bank's camp holds more than 49%, which represents a controlling stake in BIG BG.
Kott said the first motion of the day, during which PZU supported Deutsche Bank's candidate for chairman of the shareholder's meeting, took him by surprise. "Of course I didn't expect this. And I have no idea what PZU is up to," Kott said later.
The minute the vote was revealed, Kott turned to PZU President Wladyslaw Jamrozy and proceeded to embark on what looked like an angry conversation. Jamrozy refused to comment on the issue. "We will talk after the meeting," he told the Business Journal.
PZU's move prompted speculation that the insurer is openly courting Deutsche Bank as its own strategic investor. BIG BG and one of its shareholders, insurer Eureko, combined control 30% of PZU. If Deutsche Bank therefore gains control of BIG BG, it could also be primed to establish control of PZU. That would be a major gain for Deutsche, which for more than two years has tried unsuccessfully to get a foothold in the Polish market through an acquisition or privatization.
PZU has been a particularly active presence on the Polish banking market in the last six months. In addition to potentially wreaking havoc at BIG BG, PZU has also put the breaks on a proposed merger between Bank Handlowy and BRE Bank, filing a lawsuit protesting the proposed share swap in that deal.
While the full results of BIG BG's shareholders meeting were unknown at press time, observers present at the meeting all agreed that Deutsche was trying to eventually be able to remove BIG BG's management. That management team has frustrated the German bank in its past efforts to take a stake in BIG BG.
"Right now, I can't see any reason why Deutsche shouldn't do it," said Artur Szeski, banking analyst with CDM Pekao Securities.
According to estimates analysts had compiled before the shareholders' meeting, Deutsche and investment funds it controls had about 46% of voting rights in BIG BG. Deutsche's previously foresworn opponents, PZU, Banco Comercial Portugues, Eureko and BIG BG-controlled companies TBM Leasing and INEC Services, held a combined 48.6% of voting rights. PZU itself holds 3.86%, and its switch of camps put Deutsche in control.
"PZU's votes can make a hell of a difference," Szeski said.
In attempt to block PZU and Deutsche from taking hold of BIG BG, shareholders of the Polish bank decided after five hours had already passed to set up a seven-member commission to inspect previously undeclared ties between Deutsche Bank and other parties.
Deutsche Bank previously obtained a permit from the Banking Supervision Commission (KNB) to hold up to a 25% stake in BIG BG shares. If the commission finds that Deutsche Bank actually owns stakes in the investment funds that have voted in accordance with it during the shareholders' meeting, it could drastically reduce the German bank's influence. For example, Deutsche Bank would only to be able to vote on 25% of all the shares combined, not the 46% it and its supporters hold.
The first battle for control of BIG BG erupted a year ago, when two minority shareholders - Templeton Asset Management and ABN Amro (Luxembourg) Investment Management put forth the motion to transfer control of 24% stake in BIG then held by the bank's management. The idea was possibly put the bank in play, and remove management's grip on control.
Seeing BIG BG as a possible takeover target, Deutsche Bank and BRE Bank each purchased up to 9.9% of the bank's share. But shareholders rejected the motion at an extraordinary meeting in May. In June, BRE exited by selling its stake to RZB Central European Development. In the meantime, Deutsche Bank continued to push on the bank, and eventually received permission from the banking supervision to increase its stake to 25%.
In the past two years, Deutsche has unsuccessfully bid for a host of Polish banks, including Bank Przemyslowo-Handlowy (BPH), Bank Pekao and Bank Zachodni. Deutsche Bank did gain the right to control up to 75% of a small regional bank based in Krakow, Bank Wspolpracy Regionalnej (BWR).
