Impasse Between Unicredit And Poland Government Over Ownership Of Bank BPH Gets Uglier

The efforts of Unicredit to merge its Polish banking operations - BankPekao and Bank BPH - has turned uglier, as the Polish treasury department warned it may seek to annul the earlier sale of Pekao to the Italian bank
By None

The efforts of Unicredit to merge its Polish banking operations – Bank Pekao, which it owned already, and Bank BPH, in which it acquired a majority stake after buying Germany’s HVB Group last year – has turned uglier, as the Polish treasury department warned it may seek to annul the earlier sale of Pekao to the Italian bank in a privatisation deal of 1999 if it does not back off.

Last Friday Unicredit notified the Polish securities markets authority that it had launched a tender offer at PLN 702.11 a share for Bank BPH to acquired the 30% of the bank it did not own already as a result of acquiring HVB, whose Bank Austria Creditanstalt (BA-CA) subsidiary owned 70% of BPH. The goal was to merge BPH with Pekao, creating a single bank with assets of 113 billion zlotys ($35.7 billion), but the Polish government is concerned that a merger between the second and third largest banks in the country will reduce competition and lead to job losses, and deny the country a French-style “national champion.” It has urged Unicredit to sell BPH rather than acquire the rest of the shares, giving the bank until the end of January to do so.

Yesterday the Polish treasury department, which oversees state assets, said it had extended its deadline for UniCredit to sell BPH by another three months. But it warned it might seek to annul the 1999 sale of Bank Pekao to Unicredit if the Italian bank failed to comply. It maintains that, by acquiring BPH, the Italians broke a privatisation agreement on Pekao which stipulated that UniCredit pledged not to buy another bank in Poland. Unicredit denies breaching the agreement. “The treasury minister,”said the department in a press statement,”calls on [Unicredit] to sell all shares of BPH within three months or face annulment of the [Pekao] privatisation deal.”

Unicredit, which said its request for talks with the treasury ministry had gone unanswered, maintains it will resist any attempt to sell BPH and says that the non-compete clause in the 1999 deal is unenforceable under EU law.

The action of the Polish government have been criticized by the European Commission, which argues that they breach EU rules on takeovers. The Unicredit takeover of HVB has been approved by the Commission and by all other European Union member-states involved. However, the Polish authorities are unimpressed by what they see as an appeal by Unicredit to extra-territorial authority, and maintain that the conditions it attached to the 1999 deal – before Poland joined the EU – do not break EU law.

However, the actions of the conservative government are not universally popular, even in Poland. The biggest opposition party, the pro-business Civic Platform, said the government’s actions were putting the position of the country within the EU at risk, and violating the rights of shareholders.

Unicredit remains an ineffective owner of BPH, because its current 70% stake in the bank does not carry voting rights. It is awaiting permission from the Polish Banking Supervision Commission (KNB) to exercise its voting rights in BPH.

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