Compared to 2015 – a very busy year for Polish M&A with the value of deals growing by 79% to EUR 6.9 billion, which positively distinguished Poland from other CEE countries – 2016 has turned out to be less intense. Still, although policies of Poland’s right wing government – the Law and Justice Party, which was elected in November 2015 – may have weakened investors’ sentiment somewhat, economic data remains respectable at 132 deals (compared with 177 in 2015).
In terms of value, the most significant transactions in the first half of 2016 were undoubtedly the Q1 sale of shares in Smyk Group by Empik Media & Fashion to Bridgepoint fund (with a deal value of PLN 1.06 billion (EUR 239 million)) and the Q2 acquisition of 87.2% of the shares of Bank BPH SA by Alior Bank SA GE Capital for PLN 1.225 billion (EUR 276 million).
The largest transaction in Q3 was the sale of 26.2 million shares (an approximate 10% stake) of Bank Pekao by UniCredit. The Italian firm sold a portion of its stake in Poland’s second-biggest lender for PLN 3.3 billion (EUR 683 million). UniCredit’s disposal of Bank Pekao shares came amid a drive by the Polish government to boost the state’s role in the economy and wrest back more control over the domestic financial industry from foreign firms, which control about 60 percent of Polish banking assets. Although UniCredit continued to hold a controlling shareholding in Bank Pekao corresponding to 40.1% of the company’s share capital, national insurer PZU disclosed on September 28, 2016, it was launching talks to purchase a “significant” stake in Bank Pekao from UniCredit. According to a comment made by Treasury Minister Dawid Jackiewicz, it is a “priority” for the government and state-run companies to gain control of Bank Pekao. Moreover, amid the government-pushed efforts to “repolonize” the banking sector, Poland’s largest listed bank, PKO BP, announced on September 21, 2016, that it will buy the Polish leasing operations of Raiffeisen in a deal for PLN 850 million (EUR 192 million), with the parties expecting the transaction to be concluded by the end of 2016.
The largest transaction of 2016 on the Polish M&A market to date was the recently announced sale of all the shares of Allegro Group by South Africa-based global Internet and entertainment group Naspers Limited. The firm sold its stake in the most popular online shopping destination in Poland (with more than 20 million registered users) to private equity funds (Cinven Ltd, Permira, and Mid Europa Partners) for approximately PLN 12.7 billion (USD 3.25 billion).
The referendum in the UK regarding its exit from the EU resulted in strong declines on the stock exchanges around the world, including the Warsaw Stock Exchange, with its main market indices losing 200 points since the beginning of April 2016. Even positive macroeconomic data such as a falling unemployment rate amounting only to 9.7 per cent in November (the lowest percentage since 2008) did not help the Warsaw Stock Exchange.
It is possible that recent events such as Brexit, the migration crisis in Europe, and the elections in the United States will cause European economies to slow down and may negatively influence the number of M&A transactions in Poland as well. In addition to the overall economic outlook, the new EU Market Abuse Regulation (MAR) expanding the disclosure and record-keeping obligations of issuers of securities currently listed on EU regulated markets may further the trend of delisting companies from the Warsaw Stock Exchange in the coming months. Even though the introduction of MAR may not necessarily be the decisive factor for management decision makers of listed companies, it may well tip the balance towards delisting. Through the end of July, only nine new companies undertook IPOs on the Warsaw Stock Exchange, while 19 delisted.
Despite the slowdown of M&A activity, Poland still remains one of the strongest markets in the CEE region in terms of deals. With an expected year-end push to close deals, we believe Poland will remain a leader among CEE marketplaces.
By Ron Given, Partner, Dariusz Harbaty, Senior Associate, and Joanna Wajdzik, Associate, Wolf Theiss Poland
This article was originally published in Issue 3.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.