Big Polish bank merger goes through despite govt misgivings

[Ulhas Joglekar]

11 December 1999
Big Polish bank merger goes through despite govt misgivings
WARSAW, Poland : Shareholders have approved a merger for Poland's two
leading banks to create an eastern European powerhouse, despite the
government's efforts to block the move over fears of foreign intrusion.
Shareholders voted 77.9 percent late Thursday in favor of merging Bank
Handlowy SA and BRE Bank SA, crossing the 75 percent threshold needed. The
merger creates Eastern Europe's largest financial institution as measured by
capital.
Central bank officials have said it would be a strong regional entity able
to go head-to-head with Western banks in former Soviet-bloc countries.
But the vote, after an 11-hour shareholder meeting, came as a surprise to
the market because most observers had expected opponents to garner enough
votes to block it.
The Treasury Ministry, which holds 7 percent of Bank Handlowy, and a
state-controlled insurer were opposed. They argued the merger's terms favor
BRE Bank, and thus Germany's Commerzbank AG, which holds a 48.7 percent
stake in BRE.
The Treasury and insurer Powszechny Zaklad Ubezpieczen SA, or PZU, were
believed to have lined up 25.4 percent of the registered votes, which would
have been enough to block the plan.
Those in favor of the merger, including J.P. Morgan and Co., Sweden's
Foereningssparbanken AB, Zurich Financial Services Group and Commerzbank,
together control about 40 percent.
Under terms of the deal, BRE shareholders would get 2.4 Handlowy shares for
each share held. PZU has said it would favor a share-exchange ratio of 1.7
shares.
Analysts have said they think the merger terms are fair because BRE is
better managed and more profitable than Handlowy. PZU and the treasury have
demanded that Commerzbank, which aims to take a 35 percent stake in the
merged bank, pay a premium for Handlowy's shares. PZU has also demanded that
it be allowed to co-manage the bank with Commerzbank, and that Commerzbank
restrict its holding to 25 percent of the merged bank.
The new bank will have 4.2 billion zlotys (dlrs 1.1 billion) of equity at
its disposal and total assets of 34.5 billion (dlrs 9 billion). (AP)

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