Rumors send Prokom stock south

“It looks like Softbank is trying to secure itself from any future take over.”
By : Roseanne Gerin

   Comments made early last week by Prokom (http://www.prokom.pl) President Ryszard Krauze about the purpose of a planned convertible bond issue sparked uncertainty among IT sector investors, analysts said, and pushed down the stock of the country’s largest software concern about 4.7% last Monday, although the shares recovered slightly by the end of the week.

   The market buzz followed a newspaper report that quoted Krauze as saying Prokom would direct a portion of a planned zł. 150 million-200 million ($36 million-$48 million) convertible bond issue toward consolidation efforts and that Prokom would decide by the end of the year whether to start formal merger talks with software houses Softbank (http://www.softbank.pl) and Ster-Projekt (http://www.spsa.com.pl). The news conflicted with Prokom’s announcement several weeks ago that the issue’s proceeds would be used to restructure the firm’s short-term financing. The news also spurred speculation that Prokom intended to spend the money on acquiring Softbank.

   When investors balked at the contradictory news, Prokom’s shares dropped zł. 3.90 to close at zł. 83.1 on Monday, but made a slight recovery and closed at zł. 84.50 on Thursday.

   “The conflicting statements came from the market because Krauze never said he’d buy Softbank with the bond issue, but (would only) make the decision by the end of the year,” said Dorota Ubysz, an IT analyst SG Securities in Warsaw.

   To clear the air, Krauze told investors on Wednesday that one-third of the convertible bond’s proceeds would finance the restructuring of the firm’s other liabilities, while the remainder would be invested in Prokom’s joint investments with telecom giant Telekomunikacja Polska (TPSA).

   Maciej Wantke, an adviser to Krauze, emphasized that money from the bond issue would not be earmarked for possible future mergers with Softbank or Ster-Projekt. He said further details of how Prokom planned to spend the money would be published in the bond’s prospectus in six to eight weeks. The bond is likely to gain approval at Prokom’s shareholder meeting on Sept. 17 since Krauze controls about 40% of Prokom’s shares.

   In response to the rumpus, Softbank’s president Aleksander Lesz said his firm had not held any recent talks about a possible acquisition by Prokom, according to a news report. Softbank, which produces software for the financial sector, will hold a shareholders meeting on Sept. 14 to decide on changing the number of members appointed to the firm’s supervisory board to deter possible takeovers.

   “Investors reacted nervously about Prokom, (and) it made Lesz believe Softbank was the target of a hostile takeover,” said Włodzimierz Giller, equities analyst at Erste Bank in Warsaw. “It looks like Softbank is trying to secure itself from any future take over.”

   Andrzej Grzelec, Softbank’s spokesman, declined comment.