Nordea's sale of Polish unit offers PKO chance to kick off M&A drive

By bne IntelliNews April 12, 2013

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The announcement by Sweden's Nordea Bank that it intends to sell its Polish unit has piqued the interest of the country's biggest bank PKO BP. That's little surprise given that the state-controlled lender's almost weekly pronouncements that it's looking for acquisition targets is not matched by its achievements in M&A.

PKO CEO Zbigniew Jagiello told TVN CNBC on April 11 that Nordea Bank Polska would fit in well with his bank's plans to grow by buying both home and abroad. "When we think about takeovers, we think about banks that have a well-established affluent client base and good presence in big cities," Jagiello said, according to Reuters. "There are a few such banks and Nordea Bank Polska is surely among them."

Nordea announced on April 10 that it has put all of its Polish assets up for sale. The group includes a lease-factoring company, pension fund and pension fund manager. According to press estimates, the whole group could be worth PLN2.8bn-4.3bn (€679m-1.04bn). Nordea Bank Polska has a market capitalization that values it at PLN1.7bn on the Warsaw Stock Exchange.

The Swedish bank said it has sent out invitations to express interest in the assets to several banks in Poland, including the two largest, PKO and Pekao, which is controlled by UniCredit Group. Busy clearing up its own considerable damage caused by the crisis however, the Italian giant surprised with the sale of a 9.1% stake in its Polish unit in January, leaving it with 50.1%.

By way of contrast, PKO is likely licking its lips at the lack of domestic competition for the assets. The bank has found it tough to find domestic takeover targets to fulfill its ambitions, with the country's banking sector still seen as amongst the most promising in CEE despite the sharp economic slowdown and risk posed by the struggling construction sector.

Hence, PKO could potentially risk a contest for the Nordea unit from the likes of Russia's Sberbank, which has coveted an entry into the Polish market for some time. However, suspicion of Moscow remains rife in Warsaw, and the state-controlled Russian giant - along with compatriots sniffing around assets in other sectors - has been made fully aware that it is not welcome.

On top of that, financial markets regulator KNF and the central bank have both made it clear during the crisis that they are already uncomfortable with the level of foreign ownership in the Polish banking sector, and likely therefore to encourage any PKO bid.

Missed opportunities

PKO missed out on the series of Polish M&A deals provoked by the crisis which ended in March 2012 with Santander's takeover of Kredyt. It has been trying in recent months to impose itself on Bank Pocztowy - owned by post office operator Poczta Polska - but the suitor, which is lusting after the bank's wide branch network in rural areas, has seen its buyout offers rejected. To add insult to injury, Poczta Polska announced on April 8 that it has made a firm counter offer to buy PKO's 25% stake in Bank Pocztowy as it sets its sights on procuring 60% of its income from financial services by 2017.

Hence Jagiello's evident enthusiasm in the wake of the announcement. Later, he attempted to downplay PKO's interest, claiming that the price that Nordea would be willing to accept would determine any interest from the state bank, and that PKO has other irons in the fire. "In the case of Nordea it is a matter of price attractiveness," Jagiello told reporters at a conference, according to cbonds. "One should also analyze the components of this transaction as it might turn out for example that the OFE [pension fund] is worth zero."

The CEO said the bank is also analyzing a variety of other potential acquisition targets, including Bank Millennium and fund manager TFI Skarbiec. He reiterated earlier claims that three foreign owners are now looking to exit Poland, including two French banks. Bank Millennium is the other, he insisted, despite reports last week that, contrary to market speculation, Portuguese parent Millennium BCP is not looking to offload its Polish unit for now. Jagiello says however that he expects the issue to be back on the agenda in the autumn, adding that in previous talks, BCP's was asking too much.

Alior Bank, which was founded in 2008 and successfully listed on the WSE late last year, would not suit PKO he said. Meanwhile foreign targets are limited. "Our interest in acquisitions abroad is limited to a geographic area close to Poland," he said, pointing to the Czech Republic, where he mentioned troubled Belgian group KBC could be selling its stake in CSOB - speculation that was first raised in 2010.

Targets outside the commercial banking segment are under consideration also, he added, but only certain operations. "Enterprise Investors is considering whether to sell TFI Skarbiec," he said. "We will look into this transaction but the issue of price attractiveness is crucial."

However, PKO is unlikely to look at further investment in private pensions given the government's ongoing review of the system. "In the case of OFE we see no need to further invest capital, unless there is some extraordinary price opportunity: in the current situation OFE valuations must go down drastically," he said.

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