Share buys could put BIG in play
BIG BG's shares rose 20.6% last week to close at zl. 3.80 on Friday. Average daily trading volume more than tripled to 3.3 million shares and peaked on Wednesday at 4.7 million shares.
"We think the company is in play," said Artur Szeski, an analyst with CDM Pekao Securities. "It's quite an obvious conclusion: BIG is an attractive buy and technically it is possible."
Large blocks of BIG BG stock were being bought up through purchases of shares on the Warsaw Stock Exchange (WSE) and global depository receipts (GDRs) in London by BRE Brokers, the Business Journal has learned. It was not clear, however, if BRE Brokers, which is owned by Bank Rozwoju Eksportu (BRE), was buying the shares on its own behalf or for a client.
Officials at BRE declined to comment on the purchases. BRE is 49% owned by Germany's Commerzbank.
The purchases were not of sufficient volume that if an investor crossed the 5% threshold it would require disclosure with the Securities Commission (KPWiG).
Some analysts speculated that Templeton Global Investors, which already has an almost 6% holding in BIG BG, may be purchasing shares. Officials at Templeton declined to comment.
The rational for Templeton buying shares, analysts said, was that the investment fund might want to accumulate as many shares as possible before an upcoming general shareholders meeting scheduled for May 5, which might be a turning point for BIG BG. At the meeting, a vote will be taken on a Templeton-sponsored resolution to transfer control over 24.3% of the bank held by the Treasury Ministry and currently managed by BIG BG's management to all shareholders.
"If the motion passes, shareholders can easily vote to pass the treasury package to a potential strategic investor," said Pawel Szymanski, an analyst with London-based Schroders.
Existing shareholders, which in addition to the Treasury Ministry include Templeton, Powszechny Zaklad Ubezpieczen (6%) and Banco Comercial Portugues (5%), may already have such an investor in mind and could be accumulating shares now in the hope of receiving a better price in the event that an open tender to all shareholders is called, he added.
"And who might be a potential strategic investor?" Szymanski said. "Anybody, starting with BRE and Commerzbank themselves."
The shareholders meeting vote seems to put BIG BG's management in a corner. To prevent loss of control, the management board could look to sell the treasury shares to an investor of its choosing, but the bank has already made a commitment that it won't make any transactions concerning treasury shares before the shareholders meeting.
Analysts said that BIG BG would be an encouraging takeover target for several reasons.
"And its shareholding structure is the main one," said Marek Juras, an analyst with Erste Securities Polska.
The bank does not have a strategic investor. The 24.3% owned by the Treasury Ministry is held by BIG BG subsidiaries and is effectively controlled by the bank's management. GDRs, which are on deposit with the Bank of New York, constitute 20.7% of equity and 38% of shares are traded on the WSE.
"It's also relatively inexpensive," Juras said.
BIG BG's current price-to-book value ratio is 1.26. This is at a substantial discount to two other banks that have recently been taken over. When Bayerische Hypo- und Vereinsbank bought a stake last year in Bank Przemyslowo-Handlowy (BPH), it priced the bank at 3.44 times book value. Generale Bank paid 2.06 times book value for shares in Pierwszy Polsko-Amerykanski Bank and Germany's DG Bank paid 1.53 times book value for shares in Amerbank.
BIG BG currently trades at a discount to Bank Handlowy, which is priced at 0.88 times book value, but at a discount to Pekao group, which trades at 3.31 times book value.
At the end of September 1998, BIG BG had zl. 10.8 billion ($3.08 billion) in total assests. It had own capital of zl. 1.4 billion ($515 million), ranking it fifth among Polish banks. The bank's market capitalization is zl. 1.61 billion ($421 million).
BIG BG's 1998 net profit of zl. 146.5 million ($38.5 million) jumped by 117%, although this gain took into account BIG BG's merger in 1998 with Bank Gdanski.
BIG BG also offers a potential investor access to a far-reaching retail network that is undergoing a major expansion. "Such a takeover would also mean access to a country-wide network," Juras said.
BIG BG has 226 branches throughout Poland. Of these, 30 are Millennium branches, a new tech-oriented retail branch project launched last year that is expected to grow to 250 branches by 2001.
Finally, "BIG BG is also one of the last banks available for sale," Juras said.
Currently, there are two banking privatizations underway through tenders for up to 55% of shares in Pekao and a stake of up to 80% in Bank Zachodni.
In the Pekao sale, two investors are short listed: Citibank and a consortium of Unicredito Italiano and German insurer Allianz. Eleven Poland and international banks have placed initial price offers for a stake in Zachodni.
Zachodni, contrary to BIG BG, has a strong regional presence, mainly in southwestern Poland. Zachodni's market share in deposits is estimated to be at 3.1% while in credits it is 3.7%. BIG BG's share in both areas is estimated to be well above 4%, analysts say.
Whichever bank wins the Zachodni stake will also have to make commitments regarding employment levels and maintaining the bank's identity. None of these limitations would exist, however, in the case of a takeover of BIG BG.
"We think the company is in play," said Artur Szeski, an analyst with CDM Pekao Securities. "It's quite an obvious conclusion: BIG is an attractive buy and technically it is possible."
Large blocks of BIG BG stock were being bought up through purchases of shares on the Warsaw Stock Exchange (WSE) and global depository receipts (GDRs) in London by BRE Brokers, the Business Journal has learned. It was not clear, however, if BRE Brokers, which is owned by Bank Rozwoju Eksportu (BRE), was buying the shares on its own behalf or for a client.
Officials at BRE declined to comment on the purchases. BRE is 49% owned by Germany's Commerzbank.
The purchases were not of sufficient volume that if an investor crossed the 5% threshold it would require disclosure with the Securities Commission (KPWiG).
Some analysts speculated that Templeton Global Investors, which already has an almost 6% holding in BIG BG, may be purchasing shares. Officials at Templeton declined to comment.
The rational for Templeton buying shares, analysts said, was that the investment fund might want to accumulate as many shares as possible before an upcoming general shareholders meeting scheduled for May 5, which might be a turning point for BIG BG. At the meeting, a vote will be taken on a Templeton-sponsored resolution to transfer control over 24.3% of the bank held by the Treasury Ministry and currently managed by BIG BG's management to all shareholders.
"If the motion passes, shareholders can easily vote to pass the treasury package to a potential strategic investor," said Pawel Szymanski, an analyst with London-based Schroders.
Existing shareholders, which in addition to the Treasury Ministry include Templeton, Powszechny Zaklad Ubezpieczen (6%) and Banco Comercial Portugues (5%), may already have such an investor in mind and could be accumulating shares now in the hope of receiving a better price in the event that an open tender to all shareholders is called, he added.
"And who might be a potential strategic investor?" Szymanski said. "Anybody, starting with BRE and Commerzbank themselves."
The shareholders meeting vote seems to put BIG BG's management in a corner. To prevent loss of control, the management board could look to sell the treasury shares to an investor of its choosing, but the bank has already made a commitment that it won't make any transactions concerning treasury shares before the shareholders meeting.
Analysts said that BIG BG would be an encouraging takeover target for several reasons.
"And its shareholding structure is the main one," said Marek Juras, an analyst with Erste Securities Polska.
The bank does not have a strategic investor. The 24.3% owned by the Treasury Ministry is held by BIG BG subsidiaries and is effectively controlled by the bank's management. GDRs, which are on deposit with the Bank of New York, constitute 20.7% of equity and 38% of shares are traded on the WSE.
"It's also relatively inexpensive," Juras said.
BIG BG's current price-to-book value ratio is 1.26. This is at a substantial discount to two other banks that have recently been taken over. When Bayerische Hypo- und Vereinsbank bought a stake last year in Bank Przemyslowo-Handlowy (BPH), it priced the bank at 3.44 times book value. Generale Bank paid 2.06 times book value for shares in Pierwszy Polsko-Amerykanski Bank and Germany's DG Bank paid 1.53 times book value for shares in Amerbank.
BIG BG currently trades at a discount to Bank Handlowy, which is priced at 0.88 times book value, but at a discount to Pekao group, which trades at 3.31 times book value.
At the end of September 1998, BIG BG had zl. 10.8 billion ($3.08 billion) in total assests. It had own capital of zl. 1.4 billion ($515 million), ranking it fifth among Polish banks. The bank's market capitalization is zl. 1.61 billion ($421 million).
BIG BG's 1998 net profit of zl. 146.5 million ($38.5 million) jumped by 117%, although this gain took into account BIG BG's merger in 1998 with Bank Gdanski.
BIG BG also offers a potential investor access to a far-reaching retail network that is undergoing a major expansion. "Such a takeover would also mean access to a country-wide network," Juras said.
BIG BG has 226 branches throughout Poland. Of these, 30 are Millennium branches, a new tech-oriented retail branch project launched last year that is expected to grow to 250 branches by 2001.
Finally, "BIG BG is also one of the last banks available for sale," Juras said.
Currently, there are two banking privatizations underway through tenders for up to 55% of shares in Pekao and a stake of up to 80% in Bank Zachodni.
In the Pekao sale, two investors are short listed: Citibank and a consortium of Unicredito Italiano and German insurer Allianz. Eleven Poland and international banks have placed initial price offers for a stake in Zachodni.
Zachodni, contrary to BIG BG, has a strong regional presence, mainly in southwestern Poland. Zachodni's market share in deposits is estimated to be at 3.1% while in credits it is 3.7%. BIG BG's share in both areas is estimated to be well above 4%, analysts say.
Whichever bank wins the Zachodni stake will also have to make commitments regarding employment levels and maintaining the bank's identity. None of these limitations would exist, however, in the case of a takeover of BIG BG.
