Asseco to merge with Prokom

Asseco (71 PLN, -9,68%) has made an offer to purchase 23.69% stake in Prokom (136 PLN, 8,84%) from Prokom Investments and Ryszard Krauze for PLN 700m. According to our calculations this translates into PLN 212.7m per share of Prokom. The offer is valid until September 30 and is conditional upon obtaining financing by Asseco. Asseco stated that the purchase will be made within 120 days in order to avoid a public tender. Should this transaction be finalized, the management of Asseco will propose a merger of two companies.

More details are expected after the analyst meeting scheduled for 11am CET.

Our view: We find the price offered by Asseco high, as it constitutes some 70% premium over the current market valuation of Prokom and 25% premium over our valuation of Prokom. The price seems high especially taking into account that a substantial part (43% according to our valuation) of Prokom’s value is constituted by its stake in Asseco. In our view, the two main questions currently are i) obtaining of financing by Asseco, and ii) the parity that will be offered to other Prokom shareholders. Although Asseco is currently cash rich, in our opinion, obtaining PLN 700m financing will be a big challenge for the company taking also into account outlays for foreign acquisitions and interests on such debt would be substantial. In terms of parity, we would have thought that it would be based on analyst’s fair values. We believe that the transaction was inevitable, however speeded up by current political problems of Ryszard Krauze. We believe that the reason behind the merger was Mr Krauze’s will to dispose of his investment and Asseco’s will to sharply grow in market capitalization. We would expect sharply positive trading impact on Prokom and rather negative on Asseco.