Poland's PZU reportedly thrashing out a deal to buy Pekao from UniCredit

By bne IntelliNews August 29, 2016

State-controlled insurer PZU is pushing to thrash out a deal to buy the remaining 40% stake in Poland's second-largest lender Pekao from UniCredit, media reports claim.

Talks are said to have come to an impasse over price, with the Italian group seeking €3.5bn, while PZU is unwilling to pay over €3bn, The Financial Times reported on August 28, citing “people close to the situation". However, the state-controlled suitor is reportedly "confident" of wrapping up a deal by the time UniCredit's new CEO Jean-Pierre Mustier presents a group strategy in November.

PZU is being pushed by the government to expand into the banking sector to raise state ownership. The policy seeks to reverse the privatisation wave of the early 1990s that led to the takeover of much of the sector by foreign banks. Currently 58% of Polish banking is controlled by foreign investors.

CEO of PZU Michal Krupinski met management of UniCredit met in Milan last week to table an offer to buy Pekao for no more than €3bn, the FT claims. The offer is supported by capital from the Polish Development Fund through a special purpose vehicle, sources also told the newspaper. However, the Italians are apparently seeking around €3.5bn.

The dispute over price is, however, unlikely to last long, sources told the British newspaper. Mustier is looking to stabilise the capital footing of the Italian banking group, with UniCredit estimated to need as much as €9bn in new capital to stave off growing pressure due to bad loans.

The Italian banking system as a whole is facing growing threat from the issue, which has led the government in Rome to seek EU agreement on a bailout. UniCredit sold a 10% stake in Pekao via an accelerated bookbuilding in July, as well as offloading online banking unit Fineco.

The Italian group's decision to sell its remaining 40% in the Polish bank, despite the longer term potential of the country's sector, appears driven by the fact that it has a ready made suitor. The populist government is keen to increase the role of the state in the banking sector, which is dominated by foreign owners. PZU bought a controlling stake in Alior Bank last year, which in turn bought BPH from GE Capital in April.

“Pekao is one of the easiest assets to dispose of. The deal is moving forwards,” The Financial Times quoted “a person involved in the talks.” PZU and UniCredit did not offer comment. However, the two parties are clearly serious about reaching agreement, as PZU has appointed Deutsche Bank as an adviser to the deal while UBS and Morgan Stanley work for UniCredit, sources said.

PZU has also suggested it could take over Raiffeisen Polbank, which Austria's Raiffeisen Bank International has been looking to offload for around 18 months. Should the insurance giant wrap up both purchases, the Polish state would control 54% of the banking sector, according to analysts, already holding top lender PKO.







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