Poland's PZU closes in on Pekao deal

By bne IntelliNews August 23, 2016

PZU, Poland’s biggest insurer, is close to a deal to buy a controlling stake in Pekao, owned by troubled Italian bank UniCredit Group, according to wire reports. Two sources told Reuters that PZU’s chief executive would fly to Milan this weekend for talks on buying Poland's second-largest bank.

State-owned PZU is being pushed by the government to expand into the banking sector to expand state influence there, so it can be used as an arm of government policy. The policy reverses the privatisation wave after the end of communism that led to the takeover of much of Poland’s banking sector by foreign banks. Currently 58% of the sector is owned by foreign investors.

UniCredit, which currently operates the largest banking network in Central and Eastern Europe by assets outside Russia, is under pressure to raise fresh capital, because it faces a capital shortfall estimated at €7bn to €8bn. It now appears ready to sell its entire stake in Pekao.

Another source told Reuters that UniCredit is minded to sell a 40.1% stake in Pekao, though its advisers prefer selling another part of this stake on the open market first. UniCredit last month already raised €749mn by reducing its stake from 50.1% by selling a 10% stake in Pekao on the open market.

A smaller stake might also suit Pekao which, according to Reuters, has only PLN7bn (€1.6bn) in cash, far short of the estimated €3bn value of the 40% stake. Buying around 30% of Pekao, perhaps with state help, would still give PZU effective control.

PZU, through Alior Bank, has already expanded its banking operations through the acquisition of BPH from GE Capital.

PZU has previously suggested it could take over both Pekao and Polbank, the Polish unit of Austria's RBI. This would give the government control of 54% of the banking sector, Kamil Stolarski, an analyst with Haitong, told Reuters.

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