EBRD, RDIF become shareholders in MICEX-RTS stock exchange
MOSCOW. Jan 30 (Interfax) - The European Bank for Reconstruction and Development (EBRD) and the Russian Direct Investment Fund (RDIF) have concluded a deal to acquire shares in the merged MICEX-RTS stock exchange, the EBRD and RDIF said in a joint statement.
The EBRD will receive a 6.29% stake in the MICEX-RTS, and the RDIF will hold a 1.25% stake. They purchased these stakes directly from the MICEX-RTS, an informed source told Interfax.
"The investment is part of a long-term strategy to promote the development of local capital markets in Russia and broaden the regional and international appeal of this recently unified exchange," the statement said.
"The presence of such prominent institutions among the shareholders also shows that the exchange pursues best practices, meets the highest international standards and has significant growth potential. We thank our new shareholders for their confidence in our company and look forward to doing business together," head of the MICEX-RTS stock exchange Ruben Aganbegyan is quoted as saying in the statement.
The EBRD will subsequently be able to put forth its candidate for election to the exchange's board of directors.
"The turmoil in the world economy gives added urgency to the need to strengthen and deepen Russia's capital markets so that they can provide the liquidity which the domestic economy needs to access and the creation of a unified exchange represents an important milestone in that process" the EBRD's Vice President Varel Freeman is quoted as saying in the statement.
The RDIF's acquisition of a stake in the MICEX-RTS is the fund's first transaction. "The RDIF can now fully leverage its extensive relationships with sovereign wealth funds and other leading investors to pursue additional pre-IPO investment in MICEX-RTS and to further improve its IPO prospects," CEO of the RDIF Kirill Dmitriev is quoted as saying in the statement.
The managing company RDIF was registered on June 1, 2011 as a 100% subsidiary of Vnesheconombank (VEB). The Russian government plans to invest $10 billion in the fund over the course of five years. As of the end of last year, the RDIF was considering around 20 deals totaling $5-$6 billion.
The EBRD had already attempted to join in the MICEX-RTS' capital before. In the summer of 2010, the bank planned to acquire 10% of OJSC RTS from CIT Finance for $70 million. Information about this deal surfaced at the same time that negotiations began on RTS' purchase of its main competitor - MICEX. Head of the Federal Financial Markets Service (FFMS) Vladimir Milovidov and head of the FSB Alexander Bortnikov were against the deal, so it never took place. CIT Finance sold 11% of its shares in RTS at the beginning of February 2011, immediately after the merger memorandum was signed between RTS and MICEX. The shares were sold to Otkritie Financial Corporation in the interests of MICEX based on an appraisal of RTS at $840 million. The transaction was funded by Otkritie, and later the shares were transferred to the balance sheet of LLC MICEX Finance.
Under the agreement for merging the businesses, RTS was valued at 34.5 billion rubles, and MICEX - at 103.5 billion rubles. Based on these numbers, the cost of the merged exchange can be estimated at 138 billion rubles. Therefore, the EBRD's stake comes to around 8.68 billion rubles (roughly $286 million), and the RDIF's stake - 1.725 billion rubles ($57 million).
Kirill Dmitriyev, the RDIF's general director, told Interfax that the fund would be a shareholder in the exchange for five-to-seven years. "We're looking at investment in the exchange for a horizon of five-to-seven years," he said.
The RDIF is in talks to bring new investors into the exchange, he said. "We're thinking of bringing new investors in prior to the exchange's IPO. The RDIF is talking to several major foreign sovereign funds and direct investment funds," Dmitriyev said, adding that up to five potential investors were party to these talks.
The RDIF's stake in the exchange will increase as new foreign shareholders come on board, as the RDIF will be a co-investor.
The RDIF proposes to help the exchange to raise its capitalization ahead of a public offering. "We think we can be very useful to the exchange in the run-up to the planned IPO from the point of view of raising its capitalization and bringing new investors in," he said.
The RDIF itself might sell a small block of shares in the exchange's IPO, which is planned for 2013. "I think we'll be able to sell a small block of shares in the IPO, but we still plan to remain a shareholder after the placement," he said.
Dmitriyev said the RDIF viewed MICEX-RTS as a ,lucrative investment. The exchange is also one of the key elements of financial infrastructure. "Raising capital for its development is a major breakthrough for the whole Russian financial infrastructure. It is very important for long-term investors to emerge in Russia and for infrastructure to work well," he said.
Sergei Vasilyev, chairman of the board of directors at the Russkiye Fondy investment group, said that the emergence of strategic investors was positive. "This is the first deal following the exchange's unification, and affirms its value," he said.
But Vasilyev said he was not so sure the emergence of these investors would attract market investors. "Both the RDIF and EBRD are semi-governmental bodies, it would be hard to describe them as market investors. It's too soon to say that their becoming shareholders in the united exchange will draw the interest of true market investors," he said.