Polish Government Rejects Eureko’s Takeover of PZU

The ongoing battle between Poland’s new government and the Netherlands-based Eureko consortium over its plan to obtain majority control of Powszechny Zaklad Ubezpieczen (PZU), the country’s largest insurer, took a new turn yesterday when Wieslaw Kaczmarek, state treasury minister, announced that the agreement to sell additional shares to Eureko had been canceled.

Eureko, which holds a 30 percent stake in PZU, had originally agreed with the ministry to acquire an additional 21 percent, giving it majority control, in an initial public offering scheduled for last October. The events of September 11, required that then offering be postponed, and in the meantime a new government came to power in Poland, which opposes the deal with Eureko, claming that it’s giving away too much to foreign owners.

After failing to resolve the impasse, Eureko asked for talks between Dutch and Polish government officials last February, and eventually arbitration of the dispute.

While Prime Minister Leszek Miller’s government has been hostile to the deal from the beginning, it faces political repercussions within the European Union over the affair, which has raised questions on Poland’s commitment to privatization and reform, that are required before action is taken on its bid to join the EU.

Eureko has so far taken the position that it has a binding agreement with a sovereign government that should be honored. Kaczmarek, meanwhile indicated the agreement to undertake a public offering remains valid, but subject to conditions his ministry wants to see included before it approves the sale.