Poland Takes Back PZU

A ten year dispute between the Polish Treasury and the Dutch insurance company Eureko over Poland’s insurance giant PZU has come to an end. The deal was announced on Friday morning, 2 October.

It all started in 1999. PZU was in a terrible state, so Treasury Minister Emil Wąsacz from Jerzy Buzek’s government decided to privatise it. Eureko, in a consortium with Gdańsk BIG Bank paid a measly three billion złoty for a 30 percent stake in the company. Two years later, Treasury Minister Aldona Kamela-Sowińska from the AWS-UW (Solidarity Electoral Action-Union of Freedom) government sold another 21 percent stake to Eureko at an equally low price.

The next treasury minister, Wiesław Kaczmarek from Leszek Miller’s government, cancelled the deal, which prompted Eureko to send the case to the London Court of International Arbitration, which in turn ruled in its favour. Successive Treasury Ministers could not reach a deal with Eureko.

The case was becoming gradually more serious for the Polish government as PZU became more and more profitable, so that its annual profit in the past few years was not much less than what Eureko paid for its shares. PZU is now estimated to be worth up to 36 billion złoty.

That is why the recent deal was a giant relief for the Polish government. On the day the agreement was announced, Treasury Minister Aleksander Grad said, “This is the most important day of my term at the ministry.”

So what are the consequences of the agreement? The most important for the Polish government, and the crux of the dispute, is that it regains control over PZU, as Eureko will initially give up 21 percent of its stake in the company. Poland will pay 3.55 billion złoty as compensation for losses suffered by Eureko, and another four billion złoty for dividends it has not paid for the past three years. Eureko will drop the arbitration case, in which it was seeking sky-high compensation for damages.

Both sides agreed that the company will go public in 2010, at which point the treasury will sell five percent of its stake, and give the profit, an estimated 1.2 billion złoty, to Eureko, while Eureko will sell more of its shares. After the public listing, Poland will have 50 percent plus one share of the company, while Eureko will have 18 percent, which it agreed to gradually reduce to 5 percent.

The Treasury’s revenues from dividends are expected to rise significantly as a result of the agreement, while the złoty gained on the euro after the deal was announced.