ZAT, ZAP merger would alert Polish competition regulator - bank

10 July 2012 17:32  [Source: ICIS news]

LONDON (ICIS)--Anti-monopoly regulators might oppose an attempt by Polish chemical producers Zaklady Azoty Tarnow (ZAT) and Zaklady Azotowe Pulawy (ZAP) to fend off hostile bids by merging, an investment bank said on Tuesday.

Prague-based WOOD & Company noted market discussion involving a scenario in which ZAT would use the merger to oppose a takeover bid launched for it by Russian mineral fertilizer producer Acron Group; while ZAP would utilise the transaction to derail the bid for it announced by Polish synthetic fertilizer producer Synthos.

“The merger between the two companies also seems to be an attractive scenario from the perspective of the state treasury ministry [which holds controlling stakes in ZAT and ZAP]. On the flipside, the combined entity would dominate the domestic fertilizer market, which could be opposed by the anti-monopoly watchdog,” WOOD & Company analyst Piotr Drozd wrote in a note to investors.

If the companies were allowed to combine, they would make for “a large-scale regional player with a diverse fertilizer and chemical product portfolio and a significant number of synergies, both on the revenue and costs side,” he added.

A source at ZAT said the ZAP merger option was a way forward which management have not ruled out.

On 14 July, ZAT shareholders will vote on a defence to the Acron bid which would give the board the right to increase the group's share capital by 75% at any time within a three-year period, and thus dilute any holding ZAT gains in the group.

Capital raised by such a move could conceivably be put into a takeover of ZAP, said Drozd.

On Monday, the ZAP board appealed to shareholders, including the treasury ministry, to not sell their holdings to Synthos and to stick with its investment strategy.


By: Will Conroy
+44 20 8652 3214



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