Ciech’s falling value makes it ZAP target - analyst

23 June 2008 15:32  [Source: ICIS news]

PRAGUE (ICIS news)--The falling market capitalisation of Polish base chemicals producer Ciech has made it a likely takeover target for local melamine, caprolactam and nitrogen fertilizer producer ZA Pulawy (ZAP), Wood & Company investment bank said on Monday.

 

Noting that ZAP CEO Pawel Jarczewski had let it be known he was currently considering the purchase of a majority stake in Ciech, Wood & Company analyst Barbara Zaleska said this was a reversal of what was happening a year ago.

 

“A year ago it was Ciech that was declaring it was interested in taking over Polish chemical companies such as ZAP, as well as [nitrogen fertilizer and titanium dioxide (TiO2) producer] Zaklady Chemiczne Police (ZchP), [nitrogen fertiliser and polyvinyl chloride (PVC) producer] Anwil or [nitrogen fertilizer, caprolactam and plastics producer] Zaklady Azotowe Tarnow ZAT, but the situation has changed,” she added.

 

The share price of Ciech had dropped by 58% in the past year, bringing the company's market capitalisation down to zlotys (Zl) 1.9bn (€564.4m, $876.1m) and making ZAP the largest chemical company [in Poland] with market capitalisation of Zl2.4bn, Zaleska added.

 

Following last year's acquisition of German soda ash maker Sodawerk Strassfurt for €75m, Ciech was also more indebted than Pulawy, with the companies having debt to equity ratios of 2.1 and 0.3 respectively, she said.

 

Pulawy had almost Zl0.5bn in cash and should not have a problem finding extra capital for its acquisition and other plans, Zaleska concluded.

 

Ciech is currently considering whether to go ahead with a new share issue worth Zl 600-900m which would be used to finance acquisitions and expansion as part of its ongoing five-year Zl4.8bn investment programme which it began last year.

 

Last week, Ciech acquired 2.5m shares, or a 6.5% stake, in ZAT from its initial public offering on the Warsaw Stock Exchange, while it also expressed an interest in acquiring more shares in ZAT during the next stage of its privatisation.

 

($1 = €0.64, $1 = Zl2.17)

By: Will Conroy
+44 20 8652 3214

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