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The Warsaw Voice » Business » December 3, 2008
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Lotos Target Price Probed
December 3, 2008 By A.R.    
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The Polish Financial Supervision Commission is investigating the slashing of the target stock price of Lotos, Poland's second-largest fuel company, to zero by an analyst from UniCredit Bank amid speculation about an attempted hostile takeover.

In his Nov. 24 report, UniCredit analyst Robert Rethy reduced the Lotos target price per share from zl.25 to zl.0 and renewed his recommendation for investors to sell the stock. The analyst wrote that the probability of Lotos failing to survive in its existing form was higher than 50 percent, which meant stockholders might lose most or all of their money.

The report created an uproar in Poland. "An appraisal of this kind resembles actions aimed at hostile takeover," declared Paweł Olechnowicz, president of Lotos Group. Lotos officials said the methodology used by the UniCredit analyst was questionable, and even if it was sound, his conclusions were not. "On the basis of the data and methodology used for the report, the price per share should have been set at around zl.30," said Mariusz Machajewski, vice-president of Lotos. The officials contended Lotos was in good shape and there were nothing to suggest that some of its financial partners wanted to withdraw from funding the company's extensive investment program.

The Treasury Ministry, which directly holds 7 percent of Lotos shares and indirectly controls another 52 percent through the Treasury-owned Nafta Polska company, fully backed the Lotos executives. "We fully share the position of the Lotos Group management board. We have serious doubts as to the methodology adopted by the analyst," said Deputy Treasury Minister Krzysztof Żuk. He added the ministry believed the risk connected with its investment program was no higher than previously expected.

"The UniCredit analyst's lowering of the Lotos target price per share down to zero is a sensation on a global scale," said Waldemar Pawlak, deputy prime minister and economy minister. "Actions of this kind may lead to an attempt to take over the company at a very low price."
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