Oct. 29 (Bloomberg) -- PZU SA, Poland’s largest insurer, may hold an initial public offering in July after shareholders ended an eight-year dispute, Chief Executive Officer Andrzej Klesyk said.

The plan for a share sale is part of an agreement reached by the Polish government and Dutch investor Eureko BV this month over control of Warsaw-based PZU, allowing for a record 12.75 billion zloty ($4.41 billion) dividend payout.

PZU’s IPO will compete with share sales by power, oil, copper and phone companies planned by the government to help plug a budget deficit that may double next year. The state, which owns 55 percent of the insurer, and Amsterdam-based Eureko, which holds 33 percent, are “determined” to take the company public as soon as possible, Klesyk said. To meet this timetable, the insurer aims to publish a prospectus in May.

“I expect a line of investors interested in PZU from here to Heathrow or even to JFK airport,” Klesyk told Bloomberg in an interview today.

At least 20 percent of existing shares now held by Eureko and the Polish government will be sold in the IPO, according to the agreement between shareholders.

Klesyk expects PZU will post a profit of between 3 billion zloty and 3.5 billion zloty next year, after record earnings of 3.5 billion zloty to 4 billion zloty in 2009, he said. Insurers are valued at about 8 to 12 times their earnings, he said. By that measure, PZU would be worth 24 billion zloty to 42 billion zloty, based on the 2010 profit estimate.

‘Autumn’ IPO?

Klesyk, 45, declined to speculate about the value of the company. He did say he “will quit” if he doesn’t “see a 3 in the front of the valuation,” referring to a capitalization reaching at least 30 billion zloty.

Bank Pekao SA is currently the biggest Polish company listed on the Warsaw bourse, with a market valuation of about 42 billion zloty.

Under another scenario, the insurer might publish the prospectus in June and carry out the share sale in “early autumn,” Klesyk said, adding that he’d “hate” to do it then.

PZU has banked more than 75 percent of the cash it needs to pay the 12.75 billion zloty dividend on Nov. 26, Klesyk said. PZU agreed to sell bond holdings to Citigroup Inc.’s Polish unit, Bank Handlowy SA, and state-owned lender Bank Gospodarstwa Krajowego SA to gather money for the payout, he said.

Even after making a record dividend payment and meeting regulatory capital requirements, PZU will still have about 5 billion zloty to spend on takeovers. This war chest could “easily” be doubled if the insurer seeks outside financing, Klesyk said.

While PZU is looking at potential acquisition opportunities, “there are not many people who want to sell” companies in eastern Europe, he said.

Klesyk, who was appointed PZU CEO in December 2007, says he is earning the lowest salary since he finished business school because Polish law caps executive pay at state-owned companies at about $81,600 a year, before tax.

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

Last Updated: October 29, 2009 12:22 EDT