Treasury seeks end to PZU standoff
Pressure was mounting on Treasury Minister Andrzej Chronowski last week to back off in his campaign to recapture control of the showcase insurance company Powszechny Zaklad Ubezpieczen (PZU).
Following the launch of an offensive aimed at ousting pan-European insurance group Eureko from the nation's largest insurance company, by press time last week Chronowski and the Polish government were increasingly pushed into a corner to end the standoff over who would control PZU.
"The minister should withdraw his court case and sit down at the table away from the newspapers, television and radio," said Jan Wyrowinski, a Freedom Union (UW) deputy from Torun.
The treasury last week appeared to be backpedaling. After starting out the week determined to rid PZU of its strategic investor, by the end of the week ministry officials appeared ready to strike a deal.
On Friday, the treasury's press office confirmed reports the ministry was willing to negotiate with Eureko.
"The lawsuit could be withdrawn if we can reach an agreement with Eureko," Aldona Kamela-Sowinska, the deputy treasury minister handling PZU's privatization, told the daily Puls Biznesu.
Fissures also widened in the governing Cabinet. Breaking with the treasury minister's stand, Economy Minister Janusz Steinhoff said that Chronowski's move to repossess PZU was undermining confidence in Poland as a safe haven for foreign investment.
This latest chapter in the drawn-out impasse over the control of PZU was brought on by Chronowski's move to annul a year-old privatization deal with Eureko and BIG Bank Gdanski (BIG BG). Under the deal, Eureko and BIG BG agreed to pay zl. 3.1 billion ($689 million) for a 30% share in the insurance company. In addition, at the time of the privatization, Eureko secured an option to acquire a majority share in PZU when the government sells off another chunk of the company through an initial public offering next year.
In making this move, Chronowski argued that Eureko had ulterior motives in buying PZU. In court, the minister said that Eureko's aim in investing in the insurer was not to strengthen PZU, but to solidify its own position on the banking market.
"The Treasury Ministry is convinced that the real intention of acquiring shares in PZU was not to develop insurance activities and the development of the PZU group, but rather securing the stability of the shares in BIG Bank Gdanski," according to a Treasury Ministry press statement issued early last week. Though partners, Eureko has controlling interest in BIG BG.
Chronowski's actions not only ruffled opposition politicians, they also possibly tarnished Poland's image as a safe bet for foreign investors. In addition, given the ongoing crisis in the ruling Solidarity Election Action (AWS) coalition, the row over PZU threatened to undermine the government's hold on power and played into calls for early elections.
For it's part, Eureko maintains that it entered the deal over PZU in good faith and that it bought into PZU to get into the insurance business in Poland. Last week, Eureko officials launched a counter-attack, stating they were preparing to begin legal action against Poland's move to repossess PZU.
"We are consulting with our lawyers," said Lorrie Morgan, a spokeswoman for Eureko. Eureko officials, analysts and opposition politicians argued last week that the PZU row is turning out to be more about a power play within the ruling AWS than a conflict between the Polish government and Eureko. "Poland's image has been compromised by an internal fight within AWS," said Wieslaw Kaczmarek, a Democratic Left Alliance (SLD) parliamentarian.
Eureko officials agree. "The heart of this is political machinations," Morgan said.
But some minority voices in the fray see Chronowski as a possible white knight out to undo his predecessor's missteps. "When people look at what's happening they will see from the outside that it was a logical step," said Oskar Kowalewski, an assistant professor of finance at the Leon Kozminski Academy of Entrepreneurship and Management. According to Kowalewski, who has done research on the PZU-Eureko case, in attempting to back out of the deal, Chronowski is ultimately trying to win better conditions for the country's prize insurance company. "When you look at the agreement, it favors Eureko and gives nothing to PZU," Kowalewski said. "While it's unfair to throw out an investor, in another sense (PZU) is the third-largest financial institution in Poland; what will happen in the company will influence the population."
Chronowski himself played on similar themes in a full-page advertisement taken out in Gazeta Wyborcza, where he mapped out his motivations for taking action on PZU. "As citizens of Poland, all of us are owners of this piece of national property," Chronowski said in the letter. "I decided to use the law to restore effective cooperation between PZU SA and its subsidiaries."
