Ruch's move towards the WSE

The Treasury Ministry has decided to give investors the first big privatization this year as a Christmas present. Ruch, Poland's biggest press distributor, will debut on the Warsaw Stock Exchange on December 22, floating 15.5 million shares, two thirds of which will go to institutional investors and one third to individual investors.

"We estimate that the inflows from the share issue should reach up to zł.250 million. The money will co-finance the 2007-2009 investment program, worth zł.572 million," said Adam Pawłowicz, CEO of Ruch.

The investments will also be covered by Ruch's own resources, as well as loans. Three main areas will benefit from the issue, namely the retail network, the logistics system and the IT network. Some zł.115 million will be sunk into upgrading existing kiosks and opening up to 450 more in the most promising locations, such as shopping and business centers. Some zł.62 million from the IPO will go towards the enhancement of Ruch's IT solutions and zł.73 million will be invested in Ruch's logistical base, including the construction of the new, consolidated press and fast-moving consumer goods (FMCG) warehouse.

Read all about it

An average Pole, buying his or her newspapers in Ruch's kiosk, associates the company mainly with press distribution. But it's the sale of FMCG that generates the biggest share of Ruch's revenues - almost 60 percent and growing steadily. Two thirds of these revenues come from wholesale channels, while the remaining amount is sold through 34,000 outlets all over Poland, of which 10,000 operate under the Ruch brand.

In spite of the changes introduced in the company to prepare it for the IPO, and the management's promises that next year savings will reach zł.50 million, Ruch still has a long way to go before it transforms from a state-owned giant into a lean, cost-effective enterprise. Last year's results were heavily hit by the zł.69 million in reserves created for, among other things, severance payments for employees to be laid off. Because of these reserves, in 2005 Ruch recorded a net loss of zł.46.3 million.

Getting 'robbed'

"The company was being robbed for many years," Pawłowicz told journalists back in April, just after he announced the renegotiation of many contracts detrimental to Ruch, as well as redundancies, despite guarantees given to trade unions by the former management.

Cezary Klimont, the member of the management board responsible for finance, estimates that in the upcoming years the net and operational profit of Ruch will improve gradually.

"The increase will stem from a significant growth of FMCG sales, investments in retail-network expansion, an upward correction of our price policy and the introduction of display standards in kiosks," Klimont said. The company is also eying potential takeover targets and wants to capitalize on its extensive real-estate assets.

After the IPO - during which 27.5 percent of Ruch's shares will be floated - the remaining 72.5-percent stake will remain in state hands, but the Treasury Ministry says it wants to gradually decrease its control over the company.

"We've got a program for further ownership changes. In 2007 we'll reduce our share holding to 51 percent. By the end of 2008 we want to dispose of our controlling stake," said Deputy Treasury Minister Ireneusz Dšbrowski. "The 51-percent stake will probably be sold outside the stock exchange," he added.

If Ruch's strategic investor is to come from the press-distribution sector, it will have to be a foreign entity, as otherwise the transaction could not be approved by the anti-monopoly office. But Ruch's Pawłowicz stresses that entities from the retail or wholesale branch could also be interested in the acquisition. Apart from the press, Ruch sells a wide range of FMCG products, such as cigarettes, hygiene and beauty products, beverages and snacks.

After three quarters of 2006, Ruch's revenues exceeded zł.3 billion, three percent up compared with the same period in 2005. Ruch's net profit after three quarters reached zł.20.5 million, which is 35-percent more than in the same period the year before. According to the management, the improvement stems from the company's restructuring program, which should entail further improvements in the upcoming years.      

CEO:   Adam Pawłowicz

Strengths:

- The biggest network of retail outlets in the country

- Leading position on the press-distribution market

Weaknesses:

- Excessive employment and guarantees for workers

- Scattered organizational structure of the company

Ruch IPO schedule

December 11-15         Subscription for shares (individual investors)

December 11-15         Bookbuilding

December 15               Announcement of issue price

December 18-19         Subscription for shares (institutional investors)