KBC, Santander Start $1.68 Billion Sale of Bank Zachodni

KBC Groep NV of Belgium and Banco Santander SA of Spain are selling a stake in Poland’s Bank Zachodni WBK SA, seeking to raise as much as 5.39 billion-zloty ($1.68 billion) in what is to be a record Polish share offering.

The banks will offer as much as 20 million shares in a range of 240 zloty to 270 zloty each and will set the final price by March 21, Zachodni, Poland’s third-biggest lender, said in a regulatory filing today. The offering is set to be the biggest by a publicly traded company in Poland, taking the value of this year’s deals to 14.9 billion zloty, a record start of the year, according to data compiled by Bloomberg.

The banks are offering their stakes as stocks slumped in Europe and the euro weakened to its lowest level this year after an unprecedented levy on Cyprus’s bank savings threatened to throw Europe back into crisis. Santander, which completed Zachodni’s merger with KBC’s Kredyt Bank SA in January, is under pressure from Polish regulators to boost the proportion of Zachodni shares which are available to other investors. The sale will boost the bank’s so-called free-float to 30 percent.

“There’s room for such an offering on the market and the bank is well-perceived by investors” after its merger with Kredyt, Jaroslaw Niedzielewski, who helps manage the equivalent of $529 million at Investors TFI SA. “What weighs on the offering is the situation on financial markets after the tax in Cyprus, which could scare away foreign investors.”

Cyprus Tax

Zachodni shares pared losses and were unchanged at 268.8 zloty at 10:36 a.m. in Warsaw, after falling as much as 2.3 percent today. Warsaw’s benchmark WIG20 Index declined 0.9 percent, extending its decline to 4.7 percent in 2013.

Euro finance ministers reached an agreement on March 16 forcing depositors in Cypriot banks to share in the cost of the latest euro-zone bailout. Moody’s Investors Service said today the levy is negative for bank depositors across Europe, while Bill Gross at Pacific Investment Management Co. said it moves “risk-on” trades to the back seat.

The offering comes two months after sales of stakes in PKO Bank Polski SA and Bank Pekao SA, Poland’s largest lenders. The government and state-owned Bank Gospodarstwa Krajowego sold a 5.24 billion-zloty stake in PKO Bank while Italy’s UniCredit SpA sold a 3.7 billion-zloty holding in Pekao in January.

Banks in Poland boosted their combined profit 4.5 percent to a record 16.2 billion zloty last year as lending continued to grow even as the country’s economy slowed, according to data from the country’s financial regulator.

KBC is seeking to sell its entire 16.2 percent stake in Zachodni in the deal, while Santander is offering as much as 5.2 percent, Zachodni said. KBC has cut risk-weighted assets by at least 34 percent since the end of 2008 and sold more than 20 entities as part of a disposal program agreed with EU regulators in exchange for approval of state aid.

Deutsche Bank AG, Citigroup Inc., Morgan Stanley, Bank of America, Credit Suisse Group AG, KBC Securities NV, Santander Investment, Dom Maklerski WBK SA, Goldman Sachs Group Inc. and UBS AG help manage Zachodni’s sale.

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