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Poland Prepares PKO Share Sale That Could Reach $5 Billion

Poland May Seek Broad PKO Bank Share Sale, Maximize Revenue
Pedestrians walk past the entrance to the PKO Bank Polski SA headquarters in Warsaw. Photographer: John Guillemin/Bloomberg

Poland will sell shares in PKO Bank Polski SA in a September public offering that may value the central European largest bank’s sale as high as $5 billion, a record state-asset sale in the country.

State-owned Bank Gospodarstwa Krajowego will sell 10 percent and the Treasury Ministry will sell more shares according to market demand, Minister Aleksander Grad said. The government will cut its total stake, including Gospodarstwa’s shares, to as low as 25 percent from 51 percent.

“This will be a very big transaction,” Grad said at a news conference in Warsaw today.

The government may hold a record number of share sales on the stock exchange this year to help finance the state deficit and limit debt. It expects to raise 15 billion zloty ($5.3 billion) in budget revenue in 2011, after collecting 22 billion zloty in 2010. Other sales include Bank Gospodarki Zywnosciowej SA, coal producer Jastrzebska Spolka Weglowa SA and real-estate company Polski Holding Nieruchomosci SA.

The ministry is opting for a public offering because it would give the government the chance to sell a bigger stake and “encourage individual investors to take part,” said Jaroslaw Lis, who helps manage the equivalent of $3 billion at Union Investment TFI SA in Warsaw.

Individuals’ Allotment

Poland plans to set aside at least one-third of the offer for individuals.

The ministry used a different process, accelerated book building, to sell a stake in utility Tauron Polska Energia SA to institutions last week.

If the government decides to sell the entire planned PKO stake “at one time,” it may increase the bank’s valuation as “the uncertainty will disappear” from the market, Szymon Borawski-Reks, who helps manage the equivalent of $3.5 billion at Bank Zachodni WBK SA’s mutual fund in Poznan, said by phone today.

PKO fell 1.6 percent to 43.5 zloty at 1:36 p.m., declining for the first day in four and underperforming the benchmark WIG20 Index, which lost 0.6 percent. The shares have more than doubled since its initial public offering in 2004.

PKO and OTP Bank Nyrt, Hungary’s largest bank, are the biggest central European lenders not controlled by foreign banks. Foreign-owned assets ranged from 60 percent of the banking industry in Romania to almost 98 percent in the Czech Republic and Slovakia in 2009, according to the World Bank.

Shareholders Meeting

To retain control of PKO, the ministry convened an April 14 shareholders meeting to vote on capping other owners’ voting rights at 10 percent.

Last week, the government sold 12 percent of Tauron, the country’s second-largest power utility, for 1.28 billion zloty.

The ministry may have to offer investors a discount of “several percent” from PKO’s market price, said Marek Mikuc of TFI Allianz Polska SA mutual fund. Lis says the discount would be deeper in an accelerating book-building.

The ministry offered a 3.8 percent discount in the Tauron sale, it said in a statement on its website. In the sale of 10 percent of PGE SA in October, the discount was 5.3 percent.

PKO isn’t “super cheap, but it has growth potential of several percent,” Mikuc said by phone yesterday. The bank is trading at a discount to its competitors, according to Lis.

Both TFI Allianz and Union Investment plan to buy PKO shares in the offer, the fund managers said. Borawski-Reks declined to say whether Zachodni will participate in the transaction.

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