Slovenská Poisťovňa (SP), the country's biggest insurer, held the first round of a stock subscription on August 3 and 4 amidst furious allegations that companies close to the government of Prime Minister Vladimír Mečiar were being allowed to privatize the state insurer. Officials at the National Property Fund (FNM), hitherto the majority owner of SP, denied the charges, but since the FNM did not take part in the increase of the insurer's capital stock, private shareholders are indeed set to gain the upper hand.
Although SP has promised to publish complete results of the stock subscription after all three rounds have been completed (by August 21 at the latest), data released to the public so far show that the FNM is not participating in the subscription, and suggest that the FNM's share of SP will eventually drop from 50.5 percent to 40.4 percent.
During the first round, every shareholder could subscribe a percentage of new shares equal to the percentage of SP he owned. According to an SP press release, only 41.65 percent of the 375 million Slovak crowns ($10.8 million) worth of new shares were sold in that round, indicating that the FNM was indeed ignoring the subscription. In the second round, set for August 10 and 11, the remaining 60 percent of the new stock can be bought by shareholders who participated in the first round in an amount proportional to the volume of shares subscribed then. Consequently, the FNM is now definitely out of the game.
The drive to take over SP is being led by VSŽ Holding, the eastern Slovak steel giant which owns 20.5 percent of SP and which proposed the capital increase in the first place. VSŽ spokesman Jozef Marko confirmed that his company, Slovakia's biggest industrial corporation, had subscribed for all of the stock allotted to it in the first round. "We are ready to subscribe as much as allowed by other shareholders," said Marko. In that case, VSŽ will own 25.6 percent of SP after the subscription is completed. Marko said that even though VSŽ is interested in increasing its stake in SP, "we cannot imagine that one shareholder could gain a majority due to diffusion of ownership."
But both of SP's other major shareholders, Telemar and Vinlan, have been linked by business analysts to VSŽ. Each company owns approximately 8.5 percent of SP; this figure could increase to 10.8 percent for each if they participate fully in the increase. Telemar bought its shares from ARDS, a company affiliated with VSŽ. An analyst tracking the case and who requested anonymity said "everyone in the business knows they are VSŽ people." Marko, on the other hand, denied any affiliation between VSŽ ownership with the other shareholders of SP.
More is known about Vinlan. Vinlan's Chairman of the Board, Karol Melocík, is now also the CEO and chairman of SP. Together with Telemar and VSŽ, these three companies could control more than 47 percent of SP after August 21.
There is a clear political bond between VSŽ and Vinlan, on the one hand, and HZDS, the senior government party, on the other. Ján Smerek, chairman of VSŽ's supervisory board, is fourth on the HZDS candidate list for the September elections and Alexander Rezeš, the principal owner of VSŽ, is HZDS's campaign manager. Melocík was a HZDS deputy in the Czechoslovak federal parliament and then worked for Mečiar's cabinet office and the Slovak Information Service (SIS) under Ivan Lexa, one of Mečiar's closest allies.
Jewel with uncertain future
SP's allure lies partially in its more than 25 billion Slovak crowns ($720.5 million) in technical reserves. From 25 billion Slovak crowns, at least 11 billion Slovak crowns ($317 million) is deposited in banks and can easily be accessed. However, Vladimír Zlacky, an analyst with ING Barings Securities, pointed out that the appeal of owning SP does not stop there. "SP owns 67 percent of Investičná a rozvojová banka (IRB) and 72 percent of Istrobanka," he said. Their combined assets total nearly 70 billion Slovak crowns ($2 billion). The last important advantage of controlling SP is access to its databases, which contain information on property owned by various individuals.
But Zlacky warned that SP might not be a good long-term investment. "Their share of the Slovak market is above 60 percent, but slipping," he said. "If there is no turnaround in the level of services they provide, their share is going to go down rapidly, especially after their monopoly on insurance mandated by law is removed next year." In 1990, SP had 100 percent of the market.
And privatizing SP may involve legal as well as financial risks. Opposition parties have filed several lawsuits in an attempt to invalidate the entire process. "We are going to prevent this unlawful privatization," said Ivan Mikloš, the only opposition member on the FNM's supervisory board.
Using an anonymous small shareholder, the opposition SDK party is already filing suits in his name. The most important suit, filed on August 3, is based on a 1995 law stating that shares of "strategic companies" such as SP should be administered by respective ministries (in this case, the Ministry of Finance) instead of the FNM. The FNM broke the law, according to Mikloš, by not handing over the SP shares. Thus, all of the FNM's actions, including its approval of the current capital increase at the July 15 extraordinary general meeting, should be rendered invalid.
But FNM spokesman Otto Balogh told the state press agency TASR that the Ministry of Finance has an agreement with the FNM, according to which the FNM administers the shares on behalf of the ministry. Finance Minister Miroslav Maxon confirmed on August 6 that the agreement existed, and added that "Ivan Mikloš is lying in this instance."
Another lawsuit cites a 1997 law forbidding the privatization of SP until 2003, and alleges that the SP stock subscription represents a de facto privatization and is thus illegal. But Ján Cuper, an HZDS legal expert, rejected this claim as well. "Do you have any proof that HZDS or Mr. Rezeš has privatized SP?" he asked a group of reporters. "This is just a pre-election gambit of the opposition."