Bank BPH: regulatory mire continues, no upside from mandatory tender
On Friday, UniCredito announced a tender for the shares of Bank BPH, it does not already indirectly hold via Bank Austria, equating to 27.97% of capital, at a price of PLN 702.11 per share (average daily price over the past 3 months). The bid should start on 31 January and last 30 days until 1 March. According to the Polish SEC, such a bid is a legal obligation, within 3 months of acquiring a stake of over 66% in a publicly listed company. As the price represents a 12.4% discount to the closing price on 19 January of PLN 789, its clear that Unicredito is not seeking a high level of acceptance for the bid. The company still faces legal hurdles, as Polish authorities have not yet given approval for Unicredito to vote its shares in Bank BPH. There has been no announcement regarding a share exchange offer - recall that, subject to regulatory approval, Unicredito originally announced an intention to offer 33.13 UCI shares for 1 BPH share, currently worth PLN 711.8 per share.
In response to the bid, representatives of the Polish government demonstrated continued obstinacy regarding the merger and a rather weak understand of Poland's legal requirements. Surprisingly, Wojciech Jasinski, chairman of parliament's finance committee and a top candidate for the post of treasury minister, stated that 'calling a tender, without approval from Polish authorities to vote its existing shares, is a scandal and should be another argument not to refuse Unicredito'. Recall that Mr. Jasinski earlier commented that 'what the European Commission thinks, should not have any impact on the approach of the Polish government.'
Separately, according to an unconfirmed report on TVP1 newswire, Poland's 'Supreme Chamber of Control' has determined that Unicredito breached its privatisation agreement, with the Polish government, by acquiring more than 10% in an institution that competes with Bank Pekao. This technicality could well form a part of response of the Polish government to the European Commission, due on 23 January, as to why it has held up the merger process. Whilst it is obvious that Bank BPH is currently a competing institution, its equally obvious that the problem would be eliminated via a merger of the two companies.
Meanwhile, speaking at a public engagement (a breakfast to celebrate Grandmother's Day) on Saturday, PM Marcinkiewicz (also temporarily filling the position of treasury minister) was quoted as saying that he's 'convinced of the necessity to meet with Unicredito CEO Alessandro Profumo to discuss issues related to the merger and that he sees an opportunity to meet in a few weeks time.' The underlying message, to those hopeful for an acceleration of the regulatory process given the heavy press coverage and the interest of the European Commission, appears to be that a resolution of the situation is not a high priority for the current government.
Overall, we believe that the newsflow over the weekend may have a negative impact on the share price of Bank BPH. We maintain our Hold rating on the stock, with an estimated fair value of PLN 740.3 per share.