Bank Austria won't make offer for Bawag to avoid facing cartel

Deals

Bank Austria Creditanstalt AG, the east Europe unit of Italy's UniCredit SpA, won't make an offer for Bawag PSK Bank because it may face cartel problems in Austria. “Our combined market share in eastern Austria would be very dominant,” Vienna-based spokesman Peter Thier said by telephone on Friday. “We plan to grow organically instead,” he said. Erste Bank AG, Austria's second-biggest lender after Bank Austria, its partner Vienna Insurance Group, and Oesterreichische Volksbanken AG have all said they won't bid for Bawag. The Austrian Trade Union Federation hired Morgan Stanley to sell Bawag to cut debt stemming from failed hedge-fund investments between 1998 and 2000.

Non-binding bids for the lender, which focuses on retail banking, are due today. Bawag agreed earlier this year to pay at least $683 million to creditors of Refco Inc. for its alleged role in the bankruptcy of the futures broker. The creditors accused Bawag of helping Refco to defraud investors, and Bawag hasn't admitted or disputed the claims. The Austrian government in May pledged € 900 million ($1.15 billion) to help Bawag meet capital requirements. Refco's creditors were given the right to take part in Bawag's sale. They may favor a more lucrative bid from a foreign company, making negotiations with an Austrian lender more complicated, longer and potentially more expensive. The Austrian press has reported that companies including Germany's Allianz AG and Bayerische Landesbank are interested in Bawag. Hungary's OTP and Italy's Banca Intesa SpA may also consider a bid, according to the reports. The private equity companies J.C. Flowers & Co. and Cerberus Capital Management LP may also make a bid, according to the local media. (Bloomberg)

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