Tug of war continues for PZU
By : Alexander Stocks
A December court decision preventing the Treasury Ministry from dismissing Eureko-appointed members of insurer Powszechny Zaklad Ubezpieczen's (PZU) supervisory board has failed to stem deteriorating relations between the treasury and the pan-European insurance group.
According to analysts, the treasury is already scheming to oust the Eureko appointees once again, possibly at a PZU general shareholders meeting early this week.
The treasury is also planning to dismiss the management board of PZU and elect a new supervisory board, said a Eureko official who asked not to be named.
The fear that the treasury owner of 56% in PZU will discount shareholder votes has led at least two PZU employees to seek legal action. They're seeking a court order to postpone the meeting until after a ruling on whether or not PZU's privatization contract is valid, according to daily Rzeczpospolita.
When Poland's largest insurer went up for auction in 1999, the pan-European insurer Eureko took a 20% stake along with another 10% taken by consortium partner BIG Bank Gdanski (BIG BG). At the time, the treasury indicated it would later be interested in giving a controlling stake to Eureko.
Now, after several lawsuits and countersuits in Warsaw district court and worsening relations, Eureko has turned to a European Union (EU) court seeking compensation for losses incurred during the months the treasury has spent trying to reverse its decision to privatize its showcase insurance company. "It is an international matter now," said Lorrie Morgan, Eureko's press spokeswoman.
As the feud continues, talk is growing that Poland might be unsuitable for international investment and that it could lose its footing in its bid to join the EU.
A sticking point in the row has been over PZU's life insurance arm, zycie. The treasury has not allowed Eureko-backed appointees onto its management team and Eureko was further angered by recent Rzeczpospolita reports that the treasury had contacted French firms Axa and Groupama about becoming investors in zycie.
"It was the PZU Group we bought into, not (just PZU) SA," Morgan said.
As for the amount in damages Eureko is seeking, "it will be based on an external analysis of Eureko's value (in PZU)," she said. Morgan did not deny press reports putting the estimated losses at zl. 1 billion-zl. 2 billion ($244 million-$488 million).
Attempting to back out of its year-old privatization agreement with the Eureko/BIG BG consortium beginning in October, Treasury Minister Andrzej Chronowski led efforts to wrest back PZU, claiming Eureko only invested in the insurance giant to strengthen its controlling interest in BIG BG. Eureko has denied the accusation and in December made public a "white book" of letters between the two camps that reveals repeated attempts to assure the treasury of its intentions to act in the best interest of the insurer and to build up the company.
The Eureko-backed president of PZU, Jerzy Zdrzalka, was dismissed by the treasury in early November along with four Eureko-appointed members of the supervisory board, but was later reinstated by a Warsaw court. Eureko paid zl. 3.1 billion ($756 million) for the strategic stake in PZU, an amount that far exceeded PZU's share price value.
At a Thursday shareholders meeting for zycie, which is 99% owned by the PZU Group, two new supervisory board members were appointed. That happened despite objections from ousted CEO Grzegorz Wieczerzak, who, with a court injunction that protects his position, still shows up for work and considers himself the company's president.
