V&W set for expansion

The merger of men's apparel producers Wólczanka and Vistula will be completed in September at the latest at a total cost of up to zł.7 million.

"The exchange parity has been fixed at 1.25 - five Vistula shares from a new issue for four Wólczanka shares. It doesn't come up as a surprise as that's more or less what the market expected," said Rafał Bauer, the CEO of the merged entity.

Bauer predicts the merger will bring about savings of zł.3.1 million in 2006 and zł.11.8 million in 2007. The bulk of cost synergies will stem from an expected sales increase (zł.4.1 million) combined with a reduction in purchasing costs (zł.2.3 million) and marketing costs (zł.2 million).

The new entity will also benefit from a larger sales network, which currently consists of 164 outlets. By the end of the year, Vistula & Wólczanka should have some 200 stores in Poland and abroad.

The company is also eying new takeover targets and is already in talks with an entity operating on the mass apparel market and a luxury goods producer. In order to finance its takeover plans Vistula & Wólczanka will issue new shares.

"The companies have some zł.20 million at their disposal and we could get double that sum from loans, which means that we are talking about a bigger amount. It would be a big shares issue," Bauer said.

Market capitalization of the merged companies will amount to zł.360 million and Bauer is hoping to significantly increase the value. The first prognosis of the merged entity's financial results will be given after the tie-up transaction is completed.