Банкеръ Weekly



On February 5, 2001, will expire the deadline for placing tender offers for the State Insurance Institute (DZI) privatization. The procedure was opened on November 12, 1999, and the government was planning to sell it by mid 2000. But that did not prove possible. The procedure was delayed in order to register a MEBO company, which would also be given the chance to participate in the tender. It was registered in May 2000. It was in September 2000 when the privatization procedure was initiated.
Deadline for placing offers was November 27, but it was postponed four times, in view of enabling all candidates to place their best offers for the purchase of DZI. Besides, a month ago it was not yet clear which company was going to prepare the privatization contract. By the end of December 2000, the British lawyers firm Altheimer Gray was selected as privatisation procedure intermediary. On January 26, 2001, a working group of the PA discussed the sample privatization contract offered by the British lawyers and approved it unanimously.
It seems there are no more obstacles for selling DZI at last. Yet buyers should also be available. Ten companies bought the DZI Privatization Memorandum. At the first stage among the potential buyers were the Dutch TBI and Nationale Nederlande N.V., the Turkish investors Roumeli Sigorta and Demir Sigorta, the Italian Generali, the French CNP, the German We-We, the pan-European Eureco, the Bulgarian insurer Bulstrad and the unknown Bulgarian company Re Engineering. In the meantime two of the companies - We-We and Generali - withdrew from the bidding. The participation of the second gave birth to numerous speculations, as no formal letter of intention was sent by the Italian managers. This week the PA has received Generali's formal letter informing about the withdrawal of the Italian company. That put an end to the speculations.
After several prospective buyers dropped out, their number shrinked to seven. Only two companies will definitely participate - Eureco and TBI. They are the only ones which have sent letters of intent and have made the due diligence of the state insurer. Yet some of the other candidates may also place an offer in the last moment. These are still famous companies. CNP is among the six biggest European insurance companies, Nationale Nederlande N.V. is a leading Dutch insurance company, while the Turkish Roumeli Sigorta and Demir Sigorta are famous for not bargaining, but paying well and on the spot.
What are the chances of the two most serious candidates?
Eureco is among the biggest insurance companies in Europe - ranking fifth in 1999 and undoubtedly the most progressively expanding during the last decade. Eureco has the advantage that all its daughter companies, at the markets it has entered, are among the leaders, preserving at the same time their national identity. Currently Eureco encounters some problems with the Polish government for the shares in PZU it has bought. Eureco will hardly embark on bargaining if it considers the investment appropriate. For 30% of the disputable PZU Eureco paid EUR670MN.
As for TBI the company has not much experience in insurance. In the last two years it bought the Bulgarian Bulstrad and a Croatian insurance company. Experts in this field think that in this deal TBI may face a problem. The company already owns Bulstrad and if it gets DZI as well, its market share will exceed 45%, thus eventually provoking the Competition Protection Commission.
According to PA price will be the decisive factor in defining the winner in this privatization procedure. Deloitte Touche have evaluated 100% of DZI shares for USD35MN. PA hopes to sell 67% of the papers for USD40-50MN.

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