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May 12th, 2008
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PPF pursues Zentiva shares

Equity group may need to boost offer to lure shareholders

By Victor Velek
Staff Writer, The Prague Post
May 7th, 2008 issue

The PPF Group has launched a takeover attempt on the Czech Republic’s largest generic-drug manufacturer, Zentiva. The bid, which is targeted at shareholders of the publicly held pharmaceutical company, caught Zentiva completely by surprise when it was announced May 2.
Zentiva had no notice of PPF’s intentions, said spokeswoman Věra Kudynová, adding, “the board of directors will meet to deal with the offer in the upcoming days.”
In the meantime, shareholders are “strongly advised” not to respond to the bid, the firm said.
PPF, which is an equity group controlled by the Czech Republic’s richest man, Petr Kellner, has offered Zentiva shareholders 950 Kč ($59) apiece for their stocks.
“The bid is aimed at acquiring such an interest in Zentiva [that we will be able] to actively influence the strategy and day-to-day business of Zentiva,” PPF said when announcing the offer.
The bid is now pending approval from the Czech National Bank, which should decide on it by the end of the month, said PPF spokesman Jiří Hájek.
The transaction will be executed by a PPF subsidiary, Anthiarose Limited, in cooperation with Generali PPF Holding, a joint venture of Kellner’s group and the Italian insurer Generali.
Generali PPF has a 19.1 percent share in Zentiva and is its second-largest shareholder after the French pharmaceutical giant Sanofi-Aventis, which controls 24.9 percent of the company.
“We’re acting in concert with Generali PPF Holding but the transaction will be covered by PPF alone,” Hájek said, adding that the PPF Group currently owns a 0.1 percent share of Zentiva.
On the day of the takeover announcement, Zentiva shares closed at 932.50 Kč on the Prague Stock Exchange, 1.8 percent below PPF’s bidding price. The next trading day, May 5, Zentiva’s shares jumped 7.9 percent, closing at 1,006 Kč.
“I don’t think PPF will acquire much by the offer,” said Karel Potměšil, an analyst with the brokerage Cyrrus. “It is rather a public declaration of the company’s continuing interest in Zentiva.”
On May 2, the offer was already close to the market price and thus not enticing for shareholders, Potměšil said. “Now, with the price around 1,000 Kč, it is unappealing.”
Speculations about PPF increasing the bid price could further boost Zentiva’s stock value, Potměšil said.
Last year, the drugmaker saw its net profit drop 36 percent to 1.4 billion Kč due to write-offs in Romania and funding an acquisition in Turkey. However, its foreign operations have growth potential and prices above 1,000 Kč per share are sustainable in the long term, Potměšil said.
If PPF succeeds in adding some 6 percent to the existing share of Generali PPF Holding, the companies could make a deal with Sanofi-Aventis, Potměšil speculated.

Victor Velek can be reached at vvelek@praguepost.com


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