Poland's FLT Bearing May be Privatized

Polish holding company Boryszew SA, following a profitable third quarter (profits of Zloty 62.5 million, or USD $9 million), announced plans to acquire controlling shares of three state-run manufacturing operations. Slawomir Masiuk, Boryszew's President, said, "Our plans include buying a 31.5% stake in Impexmetal from the Treasury, a 20.05% stake in Izolacja Jarocin, and a stake in FLT Krasnik." Since privatization efforts began in earnest, the Polish government has repeatedly tried, unsuccessfully, to find a qualified, interested buyer for FLT (Fabryka Lozysk Tocznych) Krasnik, the country's largest bearing manufacturer. In 1999, NSK (Japan) acquired FLT Iskra. Impexmetal is the real prize for Boryszew; it currently has a 9.99% stake in Impexmetal, all of which was acquired via the open market on the Warsaw stock exchange. Impexmetal, "handles domestic and international trade of products made of aluminum, copper, zinc, lead and other non-iron metals." In July, Boryszew made an offer to acquire the Treasury's 31.5% Impexmetal stake as three other firms dropped out of the bidding, but Boryszew's offer was rejected. On September 7, Boryszew made another bid for the same 31.5% of Impexmetal (in 1997, the Treasury sold 40% of Impexmetal on the Warsaw stock exchange in a public share offering). The company said the Treasury informed it the procedure for selling the 31.5% stake should be complete by December 2004. Several observers told eBearing they believe Boryszew aims to improve its chances for Impexmetal by taking on FLT and Izolacja Jarocin, a twist which it hopes will puts it in the running ahead of the other suitors, British investment firm Bancroft, Polish bank BRE, and Cornerstone Partners. Franklin Resources, a U.S. fund, holds 18.5% of Impexmetal. On November 2, Boryszew's Izolacja Matizol division made the only offer to the Treasury for a 25.05% stake in Izolacja Jarocin. Boryszew, founded in 1991, is a diversified holding company with a wide variety of industrial product divisions. It produces polyesters and polymers, zinc and lead oxides, chemicals, packaging, glues, polyamids, lift cars and parts, and other products. It is also the largest plastic recycler in Poland. Boryszew SA has been traded on the Warsaw stock exchange since 1996. Mr. Masiuk said he is confident the deal's construction would work to its favor: "We expect that we will be able to purchase the Treasury stake in Impexmetal by the end of the year." FLT got its start in 1937 as Munition Factory #2 of the Central Industrial District. After WWII, in 1948, the operation was re christened FLT Krasnik, as a bearing manufacturer. In 1995, it was re-formed as a government-run joint stock company. Poland's Treasury has been trying to dispose its share for several years. FLT manufactures a wide variety of ball and roller bearings to international quality standards, but has been plagued by operating problems. Overemployment, lack of market focus, lack of investment in plant and equipment, and unclear cost structures are a few of the privatization challenges facing FLT Krasnik's buyer, as noted by the Polish government.