May 26, 2017 / 9:00 AM / 3 years ago

CVC scouts for more acquisition targets in Poland

WARSAW (Reuters) - CVC Capital Partners [CVC.UL], one of the world’s biggest buyout groups, is looking for more acquisition targets in Poland, despite some concerns over regulatory risks, CVC’s Polish head said at the Reuters Central & Eastern Europe Investment Summit.

CVC entered Poland in 2015 when it bought PKP Energetyka utility from the state-owned railway firm for 1.97 billion zlotys ($529 million), including debt.

The conservative Law and Justice party (PiS), which won the parliamentary election later that year, has tried to annul the transaction, saying selling assets such as PKP Energetyka contravened Poland’s national security interests.

CVC’s Krzysztof Krawczyk said however investor concerns over government policy had subsided to some degree since 2015.

“I wouldn’t call what is happening in Poland ‘political risk’,” he said.

“It’s more a concern about regulation... (But) in the last year and a half this uncertainty has diminished substantially.”

Since coming to power, the PiS has called a halt to privatizations, changed management in almost all state-run companies and questioned the rationale and pricing of the previous government’s stake sales.

Despite that backdrop, CVC agreed in February to buy one of Poland’s biggest retail chains Zabka from Mid Europa Partners, another private equity firm, and plans more investment in central and eastern Europe’s biggest economy.

“The purchase of Zabka does not satisfy our appetite for further investment in Poland. We are actively looking for investment ideas and perhaps this is why I am so optimistic on further merger and acquisitions,” Krawczyk said.

Poland saw a number of sizeable M&A deals in the past few months, including the sale of e-commerce business Allegro. In October, telecommunications company Liberty Global Plc said its Polish unit would buy the cable business of Multimedia Polska SA for $764 million.

“Poland has already become a mid-size economy. More global investors coming to the Polish market result from the fact that Polish companies have become bigger. The economic growth has translated into the scale of Polish firms, which is interesting for big, foreign investors,” Krawczyk said.

Since 2012 the average company market value of firms from the mWIG40 index .mWIG40, which comprises 40 mid-sized companies listed on the Warsaw bourse, has doubled.

“For example now all the companies in mWIG40 meet CVC criteria regarding the market capitalization. In 2009 they were too small for us to become interested in them,” Krawczyk said.

He added that a number of potential transactions worth over 100 million euros could be completed in the next five years in Poland, which he said is the leader among the CEE economies.

Editing by Justyna Pawlak/Keith Weir

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