PZU and Bank Pekao have signed a document specifying the preliminary principles of cooperation in creating a banking and insurance group (so-called Term Sheet). “This is another step in the preparation of the transaction, strengthening the cooperation of the parties” – it was emphasized in the announcement.
The message shows that Term Sheet is a key step because it transforms preliminary intentions into a specific action plan, organizes project management structures, defines the schedule and stages of work, and also sets the grounds for key elements of financial transaction and identifies the necessary external conditions for its implementation.
The merger of PZU and Pekao is getting closer
As stated in the communiqué, the parties intend to establish a control committee and joint working groups to coordinate works that will include the division of PZU and later connection with Pekao. The need to determine the parity of the exchange of shares and the involvement of independent entities for valuation was also indicated.
It has been added that this is another step in preparing a potential reorganization of the capital group and creating a new banking and insurance group. The goal is to reorganize and increase the efficiency of the capital group by releasing a capital surplus of up to PLN 20 billion.
Term Sheet sets out the principles of cooperation between both parties in the pursuit of the planned transaction, as well as tasks to be carried out and individual stages of work. The parties will be appointed by the Control Committee, which will include the PZU and Pekao CEOs and one board member from each company.
Project milestones
This committee will gather regularly, make decisions unanimously and determine the schedule and milestone of the project. Common working groups and own groups for individual areas of activities will be created. In addition, the parties will employ an external project manager together
The document also indicates that PZU has already taken and will conduct activities aimed at the division and creating a holding structure. The parties' intention was also confirmed to implement a potential transaction until June 30, 2026.
As stated, the parties will specify the rules for determining the PZU shares for the PEKAO shares, which would be issued to PZU shareholders in the merger process. The parity is to be determined taking into account the interests of all shareholders, including minority. The valuations of PZU and Bank Pekao will be made by reputable entities selected by the insurer and the bank, respectively.
A transaction dependent on a number of factors
The announcement also indicates that the transaction depends on a number of factors independent of the parties, including: entering into force of relevant legislative changes (amendment to four laws), agreements and concluding relevant transaction documentation, obtaining the consents of the Council of Ministers and a series of regulatory consents, in particular the PFSA.
It was recalled that, according to the collaboration on June 2, PZU and Pekao, they want to reorganize and increase the efficiency of the capital group by releasing a capital surplus of up to PLN 20 billion. In the first stage leading to a potential transaction, the division of PZU SA is planned by separating the holding company and in 100 percent. A company that has been dependent on her operating activities in the field of property and other personal insurance. In the second stage, the PZU holding company will be connected to the Pekao bank as a acquiring entity.
The Capital Group of the Universal Insurance Company is the largest financial institution in Poland and Central and Eastern Europe. The group is headed by PZU – the company has been listed at the WSE in Warsaw since 2010. The group includes, among others: PZU Życie SA, Link4 TU SA, TUW PZUW, Alior Bank SA, Bank Pekao SA. The group manages about PLN 300 billion of assets and provides services to approx. 22 million clients in five countries. The State Treasury in PZU has about 34.2 percent action.
Bank Pekao, founded in 1929, is one of the largest financial institutions in the region of Central and Eastern Europe and the second largest universal bank in Poland with PLN 334 billion; It has a second largest network of branches in the country. The bank is listed on the Warsaw Stock Exchange. 20 percent Pekao shares are controlled by PZU, and 12.8 percent has pfr.
Source of the main photo: Elzbieta Krzysztof/Shutterstock