New Delays Imperil Eureko, PZU Deal

February 7, 2002

Poland’s recently installed government has reportedly thrown up a new barrier for the Eureko consortium to pass in its quest for control of the country’s largest insurer Powszechny Zaklad Ubezpieczen (PZU).

Eureko, a group of affiliated European insurers, based in the Netherlands, originally purchased a 30 percent stake in PZU in cooperation with Poland’s BIG Bank Gdanski in November 1999, with the understanding that it would have operating control. The Polish government retained a 56 percent stake, and successive administrations have been reluctant to implement the accord.

Last April a compromise was reached which included an option for Eureko to acquire an additional 21 percent of PZU’s shares at a price to be set for an initial public offering originally scheduled for last fall. The events of Sept. 11, and a general decline in the Polish equity market cause the IPO to be delayed.

As one of its last acts the outgoing Solidarity government agreed to sell the shares to Eureko for a total of $666 million, but the new government, which is seen as reluctant to continue privatization initiatives, never consummated the deal.

It was expected that the delayed IPO would take place in the first quarter of 2002, and that Eureko would finally be able to acquire the shares, but t

he new government’s Treasury Minister, Wieslaw Kaczmarek, has so far failed to approve the terms of the IPO.

Although neither party has commented publicly on the impasse, unless it’s resolved the whole deal could be once again put in jeopardy, and that would raise larger questions with political implications about Poland’s commitment to privatize its inefficient state-owned industries, a prerequisite for joining the European Union.

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