Warsaw circles the wagons against Russian chemicals bid

By bne IntelliNews July 16, 2012

Tim Gosling in Prague -

Hot on the heels of a "final" improved offer from Russia's Acron for Azoty Tarnow, shareholders of Poland's biggest chemicals company approved a defence plan to increase share capital by 75% and acquire state-controlled competitor Pulawy. The move turns on its head an earlier announcement by Warsaw of plans to sell off all state-owned assets in the sector.

At an emergency general meeting on July 14, Tarnow shareholders, led by the state with a 32% stake, voted to back management's plans to issue stock worth PLN240.4m, according to PAP. The issue will be offered to shareholders of Pulawy at a ratio of Tarnow shares to Pulawy shares of 2.5:1.

Russian fertilizer maker Acron first made an offer for Tarnow in May at a slight discount to the market. The Polish government resisted the bid, as much out of opposition to selling a major asset to Russia as to the price.

Meanwhile, asked about an offer - slightly above the market at PLN102.5 per share - from Polish synthetic rubber maker Synthos for Pulawy, Treasury Minister Mikolaj Budzanowski suggested on July 12 that the government could scrap the planned sales of both chemicals concerns to merge them.

That suggestion is becoming a reality in rapid fashion. Tarnow promptly announced a bid to buy 32% of Pulawy - the state already holds 51% - at PLN110 per share the following day, saying that it sees PLN100m (€24m) in synergies and investment savings of PLN200m. Whilst the initial response to the Synthos offer for Pulawy in June appeared positive - Economy Minister Waldemar Pawlak called it "a very interesting proposition" - Deputy Treasury Minister Pawel Tamborski made it clear that Warsaw now suspects it may be no more than a front for Acron to get its hands on the company down the line. Unions at Pulawy have also called for the Synthos bid to be rejected.

The circling of the wagons to merge the two Polish companies followed an improved bid from Acron for Tarnow, as the Russian company looked to increase the pressure with what it stressed was a "final offer." It raised the price by 25, from PLN36 per share to PLN45, for a 66% stake, which values the company at PLN1.96bn (€467m), and gave shareholders the weekend to think it over.

Acron added that it may discuss purchasing a smaller stake than the 66%, should shareholders reject the additional share issue. However, that was always unlikely once Warsaw - the biggest shareholder with 32% - put its weight behind the management plan for a merger.

Tempers are fraying as Warsaw's antipathy towards Russian ownership of Polish assets has magnified, as illustrated by the words of Acron deputy CEO Vladimir Kantor in a company statement accompanying the improved offer. "The last weeks have proven that our offer is the only one on the market - all other scenarios are only speculations and do not raise the value for shareholders," he insisted. "We underline that our offer is valid until Monday, July 16, and is final."

Hence the speed with which Warsaw has turned the merger scenario from speculation into reality. Throughout the year, the government has been desperate for serious interest in both Tarnow and Pulawy to emerge, with privatization of the chemicals sector designated an early part of the plan to supplement the budget with PLN10bn revenue in 2012. However, it rustled up little interest until May, much as assets in many other sectors set for sales are struggling to find investors. However, Russian ownership is apparently a step too far.

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