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Head of Poland's PZU going to Milan for talks on buying Pekao from UniCredit, sources say
August 22, 2016 / 8:51 PM / a year ago

Head of Poland's PZU going to Milan for talks on buying Pekao from UniCredit, sources say

PZU's logo is seen at its headquarters in Warsaw March 30, 2015.Kacper Pempel

WARSAW (Reuters) - The chief executive of Poland's biggest insurer, PZU (PZU.WA), is flying to Milan for talks on buying Poland's second-largest bank, Bank Pekao SA PEO.WA, from its owner, the Italian bank UniCredit (CRDI.MI).

Two sources said on Monday that PZU's chief executive, Michal Krupinski, would go to Milan this week to discuss a possible deal.

The negotiations are part of the government's larger agenda of taking back control of the country's banking sector, which is 58 percent owned by foreign investors.

"You can say that he's going," one source close to the matter said. Another source confirmed the trip.

Another source close to the transaction said that UniCredit has already decided that a 40.1 percent stake in Pekao is up for sale. But its advisors are telling Italy's largest bank it ought to sell part of its stake on the open market, the source said, before making a deal with a strategic investor.

A different source familiar with the deal said that PZU, a state-run insurer, would be the main buyer of Pekao, as it has up to 7 billion zlotys ($1.84 billion) of cash on hand. But that is not enough to buy 40.1 percent of Pekao, a stake worth $3.5 billion.

Selling part of the stake on the market would make a deal less expensive for Poland. And a Polish buyer would still get effective control of Pekao with, say, 30 percent ownership.

"The PZU-Pekao transaction is possible, but it has to be sorted out. Such a deal could be done along with secondary public offering of some of Pekao shares. Also, the state fund PFR may be involved," the same source said.

UniCredit said last month it had raised 749 million euros by selling a 10 percent stake in Pekao. It had previously owned a controlling 50.1 percent.

UniCredit is looking for fresh capital, because it faces a capital shortfall estimated at 7 billion to 8 billion euros ($7.92-9.05 billion).

Poland's ruling party, the Law and Justice (PiS), pledged that it would increase state's control over economy in its successful election campaign last year.

"One buys banks to gain more control over the economy, not for profits," a Warsaw-based analyst said. "The deputy prime minister prepared a development plan and wanted to encourage banks to take part in infrastructure projects, but they hesitate. If banks are state-run again, they will not hesitate."

Polish Deputy Prime Minister Mateusz Morawiecki has said the government would look with interest at a potential sale of Pekao, and PZU's Krupinski said the group would consider taking over both Pekao and Polbank, the Polish unit of Austria's Raiffeisen.

Buying back Raiffeisen Polbank IPO-RBP.WA and Pekao would give PiS control of 54 percent of the banking sector, according to Kamil Stolarski, an analyst with Haitong.

PZU, PFR and UniCredit declined to comment.

Reporting by Marcin Goclowski in Warsaw and Pamela Barbaglia in London; Additional reporting in Milan by Stephen Jewkes; Editing by Larry King

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