The crisis is changing the distribution of power in the Czech economy. The investment group J&T is transferring its most valuable part – heat makers, power stations, engineering and food companies – to a new independent company that it will own jointly with the PPF Group, owned Petr Kellner, the richest Czech.
PPF will put CZK 6 billion into the new joint company. J&T and PPF will hold 40% each, while the rest will be in the hands of J&T manager Daniel Křetínský. The deal has pushed this J&T employee to the top level in Czech business. The transaction, first reported by Euro.cz on Thursday, gives rise to a strong central European player that will undoubtedly try to expand. Besides factories and heating plants, the new company will include J&T development projects, among them the plan to build a new power station in northern Bohemia.
Apart from the 40% stake in the new firm, J&T should also receive roughly CZK 13 billion from PPF. “This is a way for them to ensure the stability of their J&T Banka that is facing liquidity problems,” a well-informed source from Czech financial circles told HN.
There has been an increasing number of signals indicating problems in J&T recently. The group has no money to finance its development projects and operation of the news television Z1 that it founded. Sparta Praha, also a unit of the financial group, has announced a record loss of over CZK 150 million, and J&T Banka failed to raise capital by means of bonds in autumn.
The group, in which Slovak financiers Jozef Tkáč and Ivan Jakabovič hold 50% each, grew sharply until last year. However, the last annual report available says the group owed more than 93.5 billion already in 2007.
The financial crisis, which suddenly made access to money more complicated, caught the go-getter unprepared. Selling the most valuable part of the group to PPF can save at least part of the J&T group.
Both PPF and J&T refused to comment on the transaction on Thursday. “It is premature. No deal has been concluded yet. But we strictly reject that it would be a forced transaction from the viewpoint of J&T,” Křetínský told HN. “PPF is by no means giving us any loan,” J&T spokesman Martin Maňák said.
The new joint company should be able to get access to funding even in this difficult time. New private equity funds planned by PPF could help finance the expansion. And Kellner’s strong ally – the Italian giant Generali – will likely play a role as well.
PPF co-owner Jiří Šmejc has announced in a recent interview with HN the preparations of new private equity funds in cooperation with a “strong international institutional investor”. PPF has already established the first of these funds in Ukraine in cooperation with Generali, the Russian paper Vedomosti has reported recently.
The new joint company of J&T and PPF will be an umbrella for nearly two dozens businesses in the Czech Republic and Slovakia – for example the large heat producers in Komořany and Plzeň, engineering company ČKD Blansko, the bus maker SOR Libchavy, meat producers Vysočina and Krahulík, and a stake in electricity distributor Pražská energetika.
Apart from the planned construction of a power station in norther Bohemia and the purchase of mines in Germany, the new company backed by strong capital sources could become a serious bidder for Slovakia’s largest energy company Slovenské elektrárne if its current owner Enel decides to sell it in line with long-lasting speculations.
The position of the new company can be strengthened by the fact that it will probably become an important partner to the state-controlled energy giant ČEZ.
J&T and ČEZ are taking part in a tender to buy brown-coal mines in Germany. But the big tender is not their first business cooperation. Companies from the J&T group like ČKD Blansko and SES Tlmače supplied the ČEZ group with turbines while other companies provide services to ČEZ.
ČEZ managers are closely watching the planned transaction between J&T and PPF. Both Daniel Beneš and ČEZ CEO Martin Roman said they welcomed PPF’s entry into the J&T energy business. “For us the good news is that our partner will get a strong partner in PPF,” said Roman.
The question is what will be the fate of the remaining J&T units that will remain in the hands of the two founders.
Some commentators say the income from the sale of the industrial and energy firms will make it possible to secure the stability of J&T Banka and of the whole group. The question is what, besides the bank, is going to be left in the group. “The football club Sparta will be for sale very soon,” said an expert on the Czech investment environment. People from J&T have been silent when it comes to the group’s plans.
