Asseco Poland’s CEO Adam Góral is interviewed in weekend’s edition of Parkiet. The most interesting part of the interview relates to the firm’s expansion plans. The CEO said the strategy of purchasing small entities and merging them into strong local players (as in the case of Asseco SEE) is not the right approach for Western Europe and the USA. Thus the firm has no expansion plans related to these two latter markets. Instead Asseco is looking to the south (e.g. Africa) and the Far East to expand its operations to these regions. Regarding the Russian acquisition, talks are progressing and a final deal could be reached soon. If the ongoing acquisition fails to materialize, Asseco still has two other targets in Russia.
Our view:
We have always been sceptical about Asseco’s expansion plans in Russia and nothing has changed in this regard. The news that Asseco has two alternative acquisition targets in Russia is negative for us, as we see a risk that ‘alternatives’ could become ‘additions’ soon after the conclusion of the first acquisition in Russia, and before the company has become more familiar with the Russian IT market. We do agree with the CEO that developing a strong IT entity from smaller pieces is easier on developing markets. The sad thing is that the firm has only realized this after spending heavy amounts of cash in Western Europe. In regards to Africa and Asia - the risk profile of such expansion is significant, similar to the expansion to Russia. If these M&A projects weigh on dividend size in 2013, investors’ fears are justified. For now, however, without any details such as the weight of the planned expansion or its timing, we treat the news as neutral.