The Polish-Italian consortium informed the State Property Fund (SPF) about their withdrawal on Nov. 15. The SPF consequently decided to annul the results of the public tender to privatize 76.01 percent of shares in the bank, in which the consortium was named the winner. It was the sole bidder to acquire the bank in the privatization tender announced in March, 2000.
The banks blamed the breakdown of talks on local legislation.
"Stated the limits set by the local privatization law, the consortium has not been able to find a satisfactory agreement for the involved parties," UniCredito said in a statement.
However, Lithuanian newspapers say that the true reason that the consortium dropped their plans to acquire Zemes Ukio Bankas after half a year of negotiations should be sought in Italy.
Officials at the Bank of Italy did not deny that the decision by UniCredito, the majority owner of Pekao, could have been due to the central bank's position, the Lithuanian daily Lietuvos Rytas reported Nov. 17. It is believed that UniCredito Italiano, which is rapidly expanding in Central Europe, was forced to abandon its investment plans in Lithuania due to acquisitions in other countries. It is likely that the Italian central bank became concerned about the possible effects of the expansion on UniCredito financial indicators, according to the report. "This case is known to us but, since this is related to banking supervision issues, there will be no comments," a representative of the Bank of Italy's public relations unit was quoted as saying.
Meanwhile, Lithuanian government officials are looking to begin the privatization process anew. Lithuania has committed to privatize state-owned banks under an agreement with the International Monetary Fund.
According to Lietuvos Rytas, some senior officials consider selling 76 percent of the bank's shares through the National Stock Exchange. Some worry, however, that a public share offering would bring down the bank's price.
Pekao and UniCredito reportedly were ready to pay 107 million litas ($26.75 million) for the 76 percent stake, about 130 litas per share with a face value of 95 litas.
Lietuvos Rytas quoted some sources as saying that the German bank Nord/LB had not given up intentions to acquire the Lithuanian bank.
This was the state's second unsuccessful attempt to sell the bank. In 1998, the largest Latvian commercial bank, Parex Banka, offered two million litas ($0.5 million) for the shares as the only bidder, but officials rejected the bid as too low and did not open negotiations with the Latvian bank.
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