3rd UPDATE: Poland, Eureko Reach Agreement Over PZU Insurer
October 02 2009 - 6:51AM
Dow Jones News
Poland's Treasury has reached an agreement with
Netherlands-based insurer Eureko BV over insurer PZU, the Treasury
minister said Friday, ending an almost decade-long dispute between
Poland and the Dutch insurer.
The deal brings to close a battle over control of PZU, known
formally as Powszechny Zaklad Ubezpieczen SA. Eureko disputed the
government's failure to honor an agreement to complete PZU's
privatization, which would have allowed the Dutch company to
acquire more shares in PZU.
Eureko claimed that the failure cost it the chance to buy shares
at a lower price in the past and to raise PZU's value by taking
control of the company.
Poland holds 55.1% of PZU, while Eureko has 32.1%.
Under the terms of the agreement, Eureko will gradually reduce
its stake in PZU, and will drop the arbitration case against Poland
in exchange for compensation of 4.77 billion zlotys ($1.63
billion), several times less than the more than PLN35 billion
demanded by Eureko.
The Treasury and Eureko will sell PZU shares in an initial
public offering likely to be held next year.
In addition to compensation, Eureko will also retain the right
to accumulated dividend from shares it now owns in PZU, Treasury
Minister Aleksander Grad said.
Thursday, PZU shareholders approved the creation of a reserve
fund of PLN12 billion zlotys for unlocking cumulated dividends, a
move widely interpreted as signaling that a deal with Eureko was
imminent. PZU hasn't paid a dividend to shareholders for the past
three years.
Grad said that PZU would pay a dividend to shareholders this
year, but added that the payment would be "safe for the local
markets." This week, the zloty and Polish government bonds came
under pressure as investors were concerned that, in order to pay
the dividend, large amounts of treasury bonds held by PZU would hit
the market, while Eureko would exchange its part of the dividend
into euros, and as a result, hurting the zloty.
At 1115 GMT, the zloty was at 4.2450 against the euro, from
4.2800 earlier in the morning. Compensation to Eureko will be paid
from the dividend that the Treasury will receive from PZU, as well
as proceeds from the sale of 5% of PZU sold in the IPO. Meanwhile,
the state budget will receive PLN3.4 billion in dividends from
PZU.
Grad said that immediately after signing the agreement, Eureko
will transfer 10% of the shares it owns in PZU into a special
purpose company, controlled by the Polish Treasury. These shares
will subsequently be sold in PZU's IPO. In the next stage, Eureko
will sell a further 5% in PZU.
Grad said that investment bank Nomura (NMR), which advised the
Treasury on the deal, valued PZU at PLN25.25 billion, excluding the
cumulated dividend.
Once the Dutch insurer has reduced its stake in PZU to below 13%
and has waited a subsequent three years, it will be able to
establish competitive activities in Poland, Grad said.
For the next 16 years, Eureko can't hold a stake in excess of 5%
in PZU.
-By Marek Strzelecki, Dow Jones Newswires; +4822 447-2433;
marek.strzelecki@dowjones.com