Could Poland fertilizer agreement signal a merger?

Zaklady Azotowe Pulawy (ZAP), Poland’s largest fertilizer producer, and Zaklady Chemiczne Police (ZChP), the country’s second-largest fertilizer producer, today signed a business cooperation agreement.

With the two groups in the midst of privatisation, I wonder if potential purchasers might look to merge the two groups, with all the consequent savings in overheads. ZAP produces nitrogen fertilizer, melamine and caprolactam, while ZChP produces nitrogen phosphorus potassium (NPK) fertilizer and titanium dioxide (TiO2) so there are obvious synergies in terms of prduct portfolio.

Any moves entailing job cuts or plant closures will attract fierce opposition in Poland, where social considerations have stymied previous attempts to rationalise outdated operations.

According to ICIS news, the agreement would initially address possible joint activities in optimising production processes, investing in and repairing fertilizer and ammonia units, and pushing ahead with environmental protection and energy initiatives, the companies said.

It replaced a previous cooperation agreement drawn up in 2008, which was abandoned because of the economic downturn.

New gas agreement gives hope to Poland chemical privatisation

Good news for Poland's chemical industry this week as a long term gas supply agreement is finally signed off, guaranteeing feedstocks for many chemical firms there. Lack of an agreement could have threatened the privatisation of the country's second-largest Polish fertilizer producer Zaklady Chemiczne Police (ZChP), and others currently under offer.

According to ICIS news, Under the ‘Yamal contract’, Gazprom has agreed to increase annual gas supplies to Poland to a maximum of 10.2bn cubic meters a year. Without it, Poland, which imports about two-thirds of its gas from Russia, would from this year lack 2.5bn cubic metres. The gas deal still needs to be approved by Warsaw, but the treasury ministry said the government stood ready to sign it.

Image credit http://www.sxc.hu/photo/579069

Poland chemical privatisation faces more delays

It's perhaps not surprising that bidders are to be given extra time to submit binding offers for the package of Ciech, fertilizer, caprolactam and polymer producer Zaklady Azotowe Tarnow (ZAT) and nitrogen fertilizer, plastics and oxo alcohols producer Zaklady Azotowe Kedzierzyn (ZAK).

Poland's chemical industry privatisation, Polish state company restructuring agency Nafta Polska revealed the news on Thursday, as reported on ICIS news. The move was necessary, the agency said, because some of the six shortlisted potential buyers had requested more time to examine the financial condition and investment strategy of each of the firms in the package.

None of these companies is in particularly good shape financially and all will require further restructuring to bring them up to world-class standards. Central Eastern Europe is being hit really hard by the economic downturn too with financial instability at state level still a real concern.

Poland chemical privatisation moves a step closer

The boards of Ciech, Tarnów and Kędzierzyn are to present the financial situation and investment strategies of their companies to potential investors from the short-list this week, according to Adam Leszkiewicz, deputy treasury minister, told the Polish News Agency (PAP), quoted in Polish Market Online.
‘Investors interested in the privatisation of the first group of chemical plants have scheduled meetings this week with the boards of Ciech, Tarnów and Kędzierzyn plants, which will present their financial situation and strategy’ Leszkiewicz said.

The six short-listed companies are: an American private equity investment fund Bain Capital Ltd; a consortium of a British investment fund Cinven Ltd and an international advisory company Kolaja & Partners Ltd; private fund NQI (National Qatar Industries Company), specialized in oil, gas and petrochemical investments; German capital group PCC SE; Lithuanian UAB Achema Group and capital group I Fund Mistral SA.

The Polish Treasury would prefer to sell all three companies to one investor by the end of 2009. However, the companies may be sold separately.

Nafta Polska, a state-owned company set up to handle the privatisation
The companies are due to be privatized by the end of this year, but this is unlikely! The economic climate and collapsed demand in central and eastern Europe may jeopardise this.

(Image of Ciech HQ courtesy of Wikipedia)

Bidders shortlisted for Poland chemical privatisation

Poland's privatisation agency, Nafta Polska, has unveiled its shortlist for the chemical sell off it is planning.

According to ICIS news, US-based private equity firm Bain Capital; London-based private equity firm Cinven in a consortium with Polish human resource and interim management services company Kolaja & Partners; German chemical company Petro Carbo Chem (PCC); National Qatar Industries Company; Lithuanian chemical, logistics and cargo group UAB Achema; and Polish investment fund Mistral have been shortlisted.

The government is selling off Ciech group and a second sector comprising fertilizer groups Zaklady Azotowe Pulawy (ZAP) and Zaklady Chemiczne Police (ZChP).

It is interesting to note that no large multinationals have chosen to participate in this sell-off. Poland is a huge and potentially fast-growing market. Can these companies be in such bad shape that they are of no interest? Or are they just too small to be worth the bother?

Poland chemical privatisation deadline passes

This week the deadline for preliminary bids in Poland's chemical privatisation plan passed.

According to ICIS news, only Germany's Petro Carbo Chem (PCC) has publicly declared that it is a confirmed bidder for the package, which comprises Ciech, Zaklady Azotowe Tarnow (ZAT) and Zaklady Azotowe Kedzierzyn (ZAK).

The blog wonders whether the whole thing may fail if bids do not match up to the valuations privatisation agency, Nafta Polska, have in mind.

Poland chemical industry privatisation plans in question

Poland's chemical industry has been trying for years to privatise parts of its chemical industry. The blog has been following these developments for nearly 10 years and there has been little progress.

Political inertia is caused by succesive governments altering or abandoning existing plans. And overstaffed, unmodernised factories have remained unreformed as strong unions and succesive govenrments have failed to tackle the issue.

Now, according to Poland's Gazeta, the latest set of plans are under threat. It says: "Mr Grad's privatisation plan was to be discussed by the cabinet today. But it won't be. 'The Council of Ministers' Permanent Committee has asked for legal opinions concerning the planned sale of certain companies,' Treasury spokesperson Maciej Wewiór told Gazeta last night."

ICIS news says that last week, Poland said it was has expanded its privatisation programme, with major stakes in fertilizer, titanium dioxide (TiO2) and biofuel producers a key element.

"A minority stake in the second-largest Polish refiner and biofuels producer, Grupa Lotos, was among the assets newly announced as available to investors.

The treasury ministry also reiterated its determination to see Poland’s largest fertilizer maker, Zaklady Azotowe Pulawy (ZAP), as well as the country’s second-largest fertilizer producer, Zaklady Chemiczne Police (ZChP), sold off during next year.

Initial bids for the flagship package of the process - Ciech, Zaklady Azotowe Kedzierzyn (ZAK) and Zaklady Azotowe Tarnow (ZAT) – need to be lodged by 10 September."