Agrofert will unlikely meet the tender terms

Finance Minister, Bohuslav Sobotka, and Industry Minister, Jiri Rusnok, said yesterday evening during a joint press conference that they do not believe that Agrofert, the Unipetrol privatization winner, will meet the tender terms for the state’s 63% stake in Unipetrol and that they will recommend a new tender to the Cabinet.

While this is not really surprising given previous comments of the ministers, Mr. Sobotka also said that this week the National Property Fund will call on Agrofert to pay for the stake, and that the tender would be canceled in several weeks if payment is not received. This comes despite Agrofert’s claim that it has until the end of 2002 to pay for the stake (we believe that Agrofert will dispute a recent decision of the Anti-Monopoly Office related to the tender in another stalling tactic).

While it is becoming ever more likely that Agrofert will not complete the transaction, the relevant deadline is far from clear. Although a new tender would be good news for the stock, we keep our hold recommendation since (i) it is far from sure that more credible bidders would participate in a new tender, (ii) the operational performance of the main subsidiaries worsened significantly in 2002, and (iii) some of the subsidiaries were among the hardest hit by the recent floods in Central Europe.

Jiri Soustruznik