Erste Bank AG, Austria's second-biggest lender, and its partner, Vienna Insurance Group, said they won't make a takeover offer for Bawag PSK Bank because domestic bidders will be at a disadvantage compared with those from abroad. The Austrian Trade Union Federation, or OeGB, hired Morgan Stanley to sell Bawag, the country's fourth-biggest bank, to cut debt that stems from failed hedge-fund investments between 1998 and 2000. Non-binding bids for the lender, which focuses on retail banking, are expected as soon as Sept 8. Bawag agreed to pay creditors of Refco Inc., a defunct futures broker, at least $683 million earlier this year for its role in the bankruptcy of Refco. Refco's creditors, who have a right to take part in the Bawag sales process, may favor a more lucrative bid from a foreign company, making negotiations with an Austrian lender more complicated, longer and potentially more expensive.
„We had the impression that the role of the creditors in the process is stronger if the buyer is Austrian,” Vienna Insurance CEO Guenter Geyer said by telephone yesterday. „We don't want to negotiate with a third party in addition to the OeGB,” he said. 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 allow Bawag to reach its legal capital ratios.
All the bidders for the company will be treated equally and there will be „no discrimination whatsoever,” Morgan Stanley said in a statement yesterday. The company is inviting bids from domestic and foreign banks, insurers and private equity funds. Bawag CEO Ewald Nowotny Nowotny yesterday said „the price will be key,” when choosing the buyer. The owner will look at all the offers including those from private-equity funds, he said. Austrian Finance Minister Karl-Heinz Grasser in May said a sale to a private equity fund is unlikely because it may lead to higher job cuts. The Austrian press has reported that companies including Germany's Allianz AG and Bayerische Landesbank are interested in Bawag. Hungary's OTP and Austria's Bank Austria Creditanstalt AG have also said they are considering a bid. (Bloomberg)