Report of the Management Board of Bank Polska Kasa Opieki S.A. justifying
the spin-off of Bank BPH S.A. by transferring part of Bank BPH S.A.’s property,
constituting an organized part of its enterprise, to Pekao S.A., pursuant to Art.
536 § 1 of the Code of Commercial Companies.
Integrating the member entities of one group which conduct identical business is
justified by commercial benefits of stakeholders resulting from the economies of
scale, connected with the increased revenues and optimizing costs, while taking into
account synergies of the integrated business and strengthening of a market position
of the entity created in a such manner.
Bank Polska Kasa Opieki S.A. (“Bank Pekao S.A.”) and Bank BPH S.A. (the “Banks”)
are today members of one capital group: UniCredit Banking Group. The present
situation is a result of UniCredito Italiano S.p.A.’s (“UCI”) acquisition of a majority
stake of shares in Bayerische Hypo- und Vereinsbank Aktiengeselschaft (“HVB”)
being indirectly, through Bank Austria Creditanstalt Aktiengeselschaft (“BACA”), a
majority shareholder of BPH S.A.
UCI is a strategic shareholder of Bank Pekao S.A., holding the shares carrying the
right to 52.77%1 of the total number of votes at Bank Pekao S.A.’s General Meeting.
On April 5, 2006 UCI obtained a permit from the Banking Supervision Commission to
exercise, directly or indirectly through BACA, the right to no less than 66% and no
more than 75% of the votes at the General Meeting of Bank BPH S.A. Presently, as
a result of UCI acquiring shares from BACA in Bank BPH S.A., UCI directly has the
right to exercise 71.03% of the votes at Bank BPH S.A.’s General Meeting.
A key assumption of the UniCredit Banking Group’s strategy in Poland is to establish,
on a platform comprised of the two Banks operating inhere, an organization
characterized by outstanding sustained earnings and profitability growth that will
become a leading financial institution in the Central and Eastern European region,
and one of UniCredit Banking Group’s two major institutions operating in this region.
Integration of Bank Pekao S.A. with Bank BPH S.A. by the way of de-merging Bank
BPH S.A. is consistent with the provisions of the Agreement concluded on April 19,
2006 by and between the Ministry of State Treasury of the Republic of Poland and
UCI concerning integration of the Banks (“MST Agreement”). The MST Agreement
sets forth in detail two potential scenarios of integrating UniCredit Banking Group’s
banking activities in Poland.
According to the MST Agreement, in the first place the Banks integration is to be
carried out through a demerger of Bank BPH S.A. by way of spinning off part of its
property to Bank Pekao S.A., assuming that provisions allowing banks demerger
would come into force. If by October 19, 2006 the laws prevailing possibility of bank
de-merger would have not come into force, the integration was to take place by way
of merging Bank BPH S.A. and Bank Pekao S.A.
As at January 17, 2007.
The MST Agreement also set forth the principles of selecting a third party which
would ultimately acquire, depending on the implemented integration scenario:
− part of the enterprise created as a result of merging Bank Pekao S.A. with Bank
BPH S.A.; or
− the shares in Bank BPH S.A. held by UCI, after Bank BPH S.A. has been de-
merged by spinning off part of its property to Bank Pekao S.A.
On October 19, 2006 the Banking Law Act of August 29, 1997 (Journal of Laws of
2002 No. 72, item 665, as amended, the “Banking Law”) was amended in a manner
which made it possible to de-merge a bank existing in the form of a joint-stock
company. In effect, as per the MST Agreement, the Banks shall be integrated by
way of de-merging BPH S.A. by way of spin-off.
II. Legal basis
The Banks are to be integrated pursuant to Art. 529 § 1 item 4 of the Code of
Commercial Companies of September 15, 2000 (Journal of Laws No. 94, item 1037
as amended, the “CCC”) in conjunction with Art. 124 c section 1 of the Banking Law,
by transferring part of Bank BPH S.A.’s property, in a form of an organized part of its
enterprise (the divided company) to Bank Pekao S.A. (the bidding company) in
consideration for Bank Pekao S.A.’s shares issued to Bank BPH S.A.’s shareholders
The Management Boards of both Banks expressed their intention to integrate Bank
Pekao S.A. with Bank BPH S.A., by way of spinning off a part of Bank BPH S.A.’s
assets in the form of an organized part of enterprise to Bank Pekao S.A., in the
resolutions adopted on November 12, 2006.
The Spin-off Plan of Bank BPH S.A. (the “Spin-off Plan”) was adopted by resolutions
of Bank Pekao S.A.’s Management Board and Bank BPH S.A.’s Management Board,
on, respectively, November 14 and 15, 2006.
After, as required by the Banks’ Charters, the Supervisory Boards’ accepted on
November 15, 2006, the intended integration of the Banks, to be effected by way of
Spin-off and the Spin-off Plan, on November 15, 2006 the Management Boards of
the Banks signed the Spin-off Plan.
The Spin-off Plan was published in Monitor Sądowy i Gospodarczy No. 239 of
December 8, 2006, under item 15136.
III. Economic rationale. Goals achieved through the Spin-off
Integration through the Spin-off will yield benefits to both of the Banks, their clients
As a result of transaction, Bank Pekao S.A. will be able to occupy the leading position
at the Polish banking market, which will leverage, among others, on:
1) retail banking, in the scope of which the leading bank for Polish families will
be created, offering highest level of services and utilizing the best practices of
2) SME, VIP, Private, brokerage services, in the scope of which the market
leader offering full range of credit products, service of advisors and a modern
methods of credit risk assessment, will be created,
3) corporate banking, satisfying all the needs of business clients through the
designated client’s advisors, supported by the product specialists.
As a consequence,
Bank Pekao S.A. and its customers will enjoy a broad range of scale effects resulting
from the Spin-off. In particular, the following long-term objectives shall be achieved:
1) providing all the customers of Bank Pekao S.A. with a convenient network of
branches and ATMs all over the country and with a wide, competitive offer of
financial products and services;
2) reaching, by supporting management systems based on best practices, the
highest quality of risk management, planning and performance management;
3) winning the leading market position in terms of cost management, leveraging
on the scale effect and purchase techniques based on best practices;
4) winning the position of the preferred employer among Poland’s financial
institutions with ability to attract and retain the most talented employees and
contribution to the development of banking staff’s skills in Poland.
Simultaneously, BPH will remain on the Polish banking market, as an independent
entity having large growth potential amongst 10 leading banks in Poland, having:
1) the capabilities to carry on a stable and competitive banking business in a
countrywide network of 200 outlets equipped with the required infrastructure
and support of Head Office;
2) a well-known and well-established brand;
3) qualified and experienced staff;
4) an efficient organization;
5) the ability to continue operations with the existing BPH’s product offering;
6) the platform for development of corporate banking;
7) strong position at the market of investment funds.
The integration of the Banks through the Spin-off is additionally justified by
shareholders’ interests. Bank BPH S.A.’s current shareholders will benefit from
becoming shareholders of Bank Pekao S.A. while retaining their Bank BPH S.A.
shares, which should enable them to participate in the growing value of both Banks in
The Management Board of Bank Pekao S.A. believes that the integration of the
Banks through the Spin-off will strengthen the investors belief in attractiveness and
profitability of Bank Pekao S.A.’s shares, due to:
1) strong fundamentals and strategic positioning of Bank Pekao S.A., including
significant presence in attractive segments of the market, sustainable
revenues drivers and a cost efficient organization model;
2) attractive increase of Bank Pekao S.A. value due to increase in the years
2006-2010 of CAGR proceeds by 7%, CAGR credits by 11-13% and CAGR
deposits by 5-7% and cost savings resulting from synergy (approx. 240 million
gross savings, which will be gained in 2009);
3) increased liquidity of new shares resulting form the increase of shares’ volume
at the stock exchange trading;
4) confirmation of the policy of active communication with the investors
connected with the advantageous rules of Bank Pekao S.A. policy in the scope
IV. Division and valuation of assets. Justification of the Share Allocation Ratio
According to the Spin-off Plan, Bank Pekao S.A. will take-over an organized part of
Bank BPH S.A.’s enterprise, except for certain separated elements of the property,
including, without limitation, 200 of Bank BPH S.A.’s outlets, Building Society of Bank
BPH S.A., the rights to use Bank BPH S.A.’s trademarks (except for those related to
the business of HVB and BACA), the right to Bank BPH S.A.’s corporate name, and
the necessary support services and infrastructure, such as IT services, back office
services and other, based on which Bank BPH S.A. will continue its banking activity
following the Spin-off, and Investment Fund Society BPH S.A.. The choice of the
outlets that will remain in Bank BPH S.A. was conducted in compliance with the MST
Agreement, pursuant to which the key factor considered in selecting these outlets
was the degree of overlap of Bank Pekao S.A.’s and Bank BPH S.A.’s networks in
terms of range of distribution.
The division of Bank BPH S.A.’s property agreed upon in the Spin-off Plan was
effected as at October 1, 2006. The Spin-off Plan also specifies the rules governing
changes of assets assigned to Bank Pekao S.A., that raised from October 1, 2006
until the Bank BPH S.A. demerger registration day.
The Spin-off Plan has been developed in such way as to: firstly, enable the Banks to
identify, on the spin-off date, the property assigned to each of them (including the
rights and obligations relating to their creditors) and secondly, enable Bank BPH
S.A.’s creditors to identify their respective receivables as being assigned to either
Bank Pekao S.A. or Bank BPH S.A.
A detailed description of the property (assets and liabilities) of Bank BPH S.A. as well
as the permits, concessions and relieves granted to Bank BPH S.A. and assigned to
Bank Pekao S.A., is provided in Part II (Description of components of property,
permits, concessions and relieves vested in Pekao) of the Spin-off Plan, and Tables
2-16 attached thereto. A pro-forma breakdown covering the assets and liabilities
assigned to Bank Pekao S.A. under the Spin-off, made as at October 1, 2006, is
attached to the Spin-off Plan as Table 1.
All of Bank BPH S.A.’s property (including receivables and obligations) that has not
been assigned to Bank Pekao S.A. in the Spin-off Plan will remain with Bank BPH
A valuation of Bank BPH S.A.’s property in the form of an organized part of enterprise
assigned to Bank Pekao S.A. pursuant to the Spin-off Plan was conducted in October
and November 2006. The valuation was made on the basis of analyses conducted
with the use of various standard methodologies applied to valuing financial
institutions, such as:
1) Trading Market Multiples Analysis;
2) Regression Analysis;
3) Dividend Discount Model.
The valuation was prepared on the basis of:
1) projections for 2006 through 2008 based on Bank BPH S.A.’s business plans
adjusted to reflect in the cost structure of the part of the enterprise transferred
to Bank Pekao S.A. a simulation of the items characteristic for activities of a
2) a pro-forma breakdown balance as at October 1, 2006;
3) publicly available historical information regarding Bank BPH S.A.; and
4) other publicly available information.
The basic principles of the aforementioned methodologies are described in the Spin-
Based on the valuations of Bank Pekao S.A. and a part of Bank BPH S.A.’s property
assigned to Bank Pekao S.A. according to the Spin-off Plan performed independently
by the two Banks and taking into consideration:
− the median point of the overlapping segment of the valuations; and
− the fair value of Bank Pekao S.A. and the part of Bank BPH S.A.’s property
assigned to Bank Pekao S.A.
the Share Allocation Ratio was established at 1:3.3.
The established Share Allocation Ratio means that each shareholder of Bank BPH
S.A., as a result of its possession of each Bank BPH S.A. share, shall receive 3.3
shares in Bank Pekao S.A., while retaining its existing shareholding in Bank BPH
The Share Allocation Ratio provided in the Spin-off Plan was reviewed, according to
the best market practices, by investment banks J.P. Morgan plc and Merrill Lynch
which confirmed its accuracy and reliability.
Given that the Share Allocation Ratio was expressed as a non-integer number, the
Spin-off Plan sets forth the terms for additional cash payments, since it is not
permitted to issue any fractional shares.
A shareholder of Bank BPH S.A. will receive a cash payment, if the product of the
number of the shares it holds and the Share Allocation Ratio is not an integer. In
such case, the number of the Spin-off Issue Shares (as defined in section VI. below)
being issued to the shareholder will be determined by rounding the number of the
Spin-off Issue Shares to which such shareholder is entitled down to the nearest
integer. In consideration of the unissued fractional Spin-off Issue Share, the
shareholder will receive a cash payment equivalent to the fractional value of one
Spin-off Issue Share.
For the purposes of cash payments, taking account of the interests of Bank BPH
S.A.’s shareholders, the Spin-off Plan assumed that one Spin-off Issue Share is
equal to an average stock market price of Bank Pekao S.A.’s shares over 30 (thirty)
consecutive trading days preceding the reference day; it being understood that a
stock market average price is an arithmetic mean of average, daily prices weighted
by the volume of trading; the reference day is a day fixed in accordance with the
relevant regulations of the National Depository for Securities (Krajowy Depozyt
Papierów Wartościowych S.A.), on which day the shares in Bank BPH S.A. recorded
in securities accounts will entitle the owners of the accounts to receive the Spin-off
The cash payments will be paid out of the supplementary capital of Bank Pekao S.A.
V. Auditor’s opinion
According to Art. 312 in conjunction with Art. 532 §1 and Art. 536 §3 of the CCC, a
report of the Management Board of Bank Pekao S.A. regarding the part of the Bank
BPH S.A.’s property in the form of the organized part of an enterprise assigned to
Bank Pekao S.A. pursuant to the Spin-off Plan, prepared pursuant to Art. 311 of the
CCC, has been audited in terms of its correctness and accuracy by a certified auditor
appointed by the Registry Court. On January 12, 2007, Ms. Dorota Snarska-Kuman,
certified auditor, issued an opinion determining that the value of Bank BPH S.A.’s
property assigned to Bank Pekao S.A. established as described above, is at least
equal to the nominal value of the shares of Bank Pekao S.A. that will be allotted in
consideration for that property to the shareholders of Bank BPH S.A. The certified
auditor’s opinion is available in the registration files of Bank Pekao S.A. (KRS No.:
14843) at the District Court for the Capital City of Warsaw, XII Business Division of
the National Court Register.
VI. Shareholding structure of the Banks after the integration through the Spin-off
In order to issue Bank BPH S.A.’s shareholders with the aggregate number of
94,763,559 (ninety-four million, seven hundred and sixty-three thousand, five
hundred and fifty-nine) of Bank Pekao S.A. shares resulting from the Share Allocation
Ratio and the total number of already issued shares in Bank BPH S.A., the share
capital of Bank Pekao S.A. will be increased by PLN 94,763,559 (ninety-four million,
seven hundred and sixty-three thousand, five hundred and fifty-nine),by way of
issuing “I” series ordinary bearer shares with a nominal value of PLN 1.00 (one) per
share (the “Spin-off Issue Shares”).
It is Bank Pekao S.A.’s intention to have the Spin-off Issue Shares introduced to
trading on the regulated market in Poland conducted by the Warsaw Stock
Exchange, according to the relevant rules and regulations governing securities’
trading on the regulated market.
The public offering of the Spin-off Issue Shares and the introduction to trading on the
regulated market organized by the Warsaw Stock Exchange will be conducted
pursuant to an issued information document, executed, approved and made public in
accordance with the provisions of the Act on Public Offerings and the Terms and
Conditions for Introducing Financial Instruments to an Organized Trading System,
and on Public Companies of July 29, 2005 (Journal of Laws No. 184, Item 1539, as
amended; the “Act on Public Offerings”).
The information document will provide, among other information, details regarding
the terms of allocating the Spin-off Issue Shares and the cash payments.
In order to equalize the rights under the Spin-off Issue Shares and the rights attached
to the shares previously issued by Bank Pekao S.A., the Spin-off Issue Shares will
allow to participate in Bank Pekao S.A.’s profits from January 1, 2008, assuming that
the dividend date for the dividend paid for 2006 will be established by the Ordinary
General Meeting of Bank Pekao S.A. approving the 2006 financial statements, on a
day preceding the spin-off date, being the day the Bank Pekao S.A. share capital
increase related to issuing the Spin-off Issue Shares is registered.
As a result of the Spin-off, the expected shareholding structure of Bank Pekao S.A.
will be as presented below2:
UniCredito Italiano S.p.A. 59.38%
State Treasury of the Republic of Poland 3.96%
Other shareholders 36.66%
The data included in the table above that illustrate the percentage share in the share
capital of Bank Pekao S.A. is based on information disclosed by the shareholders
pursuant to the provisions of the Act on Public Offerings.
Forecasted as at January 17, 2007.
Following the Spin-off, the expected shareholding structure of Bank BPH S.A.’ will be
as presented below:
UniCredito Italiano S.p.A. 71.03%
State Treasury of the Republic of Poland 3.68%
Other shareholders 25.29%
As a result of the subsequent sale of all Bank BPH S.A. shares held by UCI to the
third party, the target ownership structure of Bank BPH S.A. will depend on the total
number of shares acquired by the third party after the public tender. The third party’s
share in the share capital of Bank BPH S.A. may be higher than the current UCI’s
share, depending on the number of minority shareholders who elect to sell their
shares to the third party during the public tender.