Sept. 24 (Bloomberg) -- Poland and Dutch insurer Eureko BV may be close to resolving an eight-year ownership dispute over PZU SA, the nation’s largest insurer, to release a dividend payment of about 15 billion zloty ($5.3 billion).

PZU shareholders will meet tomorrow to discuss the dividend. Treasury Minister Aleksander Grad and Eureko officials are negotiating a broader accord to settle the Dutch investor’s claim to a majority stake in PZU and enable a payout covering about 13 billion zloty of PZU’s retained profits from previous years and 2.3 billion zloty in net income to date this year.

Prime Minister Donald Tusk “hopes” to receive a report on the talks in time for a Cabinet meeting next week, he told reporters on Sept. 22. Grad said on TVN CNBC yesterday the talks “shouldn’t be drawn out too long,” adding he won’t bow to time pressure as “these are horribly difficult negotiations.” Eureko spokeswoman Lorrie Morgan declined to comment.

At stake is control over a company worth about the same as Finland’s Sampo Oyj, Netherlands-based Aegon NV, and France’s CNP Assurances. PZU’s unlisted shares trade at about 350 zloty over the counter, valuing it at 30.2 billion zloty. The Treasury in January estimated PZU’s value at between 37 billion zloty and 42 billion zloty, based on figures cited in its rejection of a settlement offer.

‘Closer’

The decision to put a dividend on the agenda of the shareholders’ meeting suggests an agreement is near, said Bartosz Pawlowski, an emerging-markets strategist at BNP Paribas SA in London.

“Compromise is certainly closer as both parties need money,” he said.

Resolving the conflict may result in an initial public offering next year, Deputy Treasury Minister Jan Bury said last week. Poland owns 55 percent of PZU and has said it will sell state assets to rein in its budget deficit, which the European Union estimates will reach 6.6 percent of gross domestic product this year.

Eureko, which holds 32 percent of the insurer, sold new shares to raise capital this year after posting a 2.1 billion- euro ($3.1 billion) loss in 2008.

PZU’s retained profits are so large that ING Bank warned in a research note last week that currency outflows on Eureko’s slice of the dividend may weaken the zloty. Bond investors are concerned PZU may flood the market as it raises cash to pay the dividends, prompting Piotr Marczak, head of the Finance Ministry’s debt department, to tell the daily Parkiet the ministry doesn’t expect that.

‘Opportunity’

PZU may fetch as much as 600 zloty a share in an initial offer, putting its market capitalization at 51.8 billion zloty, said Marcin Juzon of Secus Holding SA, a private-equity firm whose clients hold a “significant” number of PZU shares.

The government and Eureko, their finances eroded by the global credit crisis, have incentives to close a deal quickly, Juzon said.

“I don’t see an opportunity like this one recurring,” said Juzon, adding that Eureko’s improving finances may harden its stance if talks drag on into next year.

Eureko, partly owned by Rabobank Group NV, bought 30 percent of PZU in 1999, and sued Poland for breaking a pledge to sell it a further 21 percent. An international arbitration court ruled in 2005 that the government breached a treaty with the Netherlands. The arbitration, in which Eureko is demanding 35.6 billion zloty in damages, was suspended in May to facilitate negotiations.

‘Success’

“There would be many funds interested in buying PZU and I have no doubt that a share sale would be a success,” said Marek Chlopek, a partner at Penton Partners, a private- equity firm that owns about 100,000 PZU shares. PZU has wider margins than its European peers, he said.

PZU shares, originally distributed to employees, sell off- market for about seven times 2008 earnings, compared with about 11 for similar companies. Allianz SE, Europe’s biggest insurer by market value, is trading at about 10.4 times earnings.

PZU needs nine months to a year to get ready for an IPO if shareholders approve it, Michal Witkowski, a spokesman for the company, said by phone on Sept. 17.

A settlement may not include a share sale. In a 2004 agreement that was later ditched, Poland agreed to an IPO that would have left about 33 percent of PZU shares traded on the market. A stake of that size may be worth about 17 billion zloty, based on Juzon’s high estimate of 600 zloty a share.

That would be more than double the 7.89 billion zloty that PKO Bank Polski SA, the nation’s No. 1, raised in Poland’s largest IPO in 2004.

To contact the reporter on this story: Marta Waldoch in Warsaw on mwaldoch@bloomberg.net

Last Updated: September 24, 2009 01:37 EDT