Rosbank, Russia’s sixth largest bank by Tier 1 capital, was en route to list on the London Stock Exchange when its main shareholder, Interros, decided to sell a 10% stake in the bank to Paris-based Société Générale for $317m.
You do not need to be a capital markets expert to imagine the reaction of the IPO managers, particularly when they had to learn of the sale via the newswires – less than 12 hours before launching the IPO.
However, this last-minute deal pleased all parties concerned as much as it displeased the lead managers Credit Suisse, Deutsche Bank and HSBC, and co-lead manager Merrill Lynch.
With the sale, Interros – one of the largest private investment companies in Russia and owner of 98% of Rosbank – will receive a price that values the target at more than $1bn higher than originally expected when mandates for the IPO were announced. It also implies a price-to-book multiple of four times assets.
On the other side, Société Générale has access to one of the most powerful players in the Russian banking market. With almost 800 branches, Rosbank’s retail network covers more than 80% of Russia, with a focus on fast-growing regions such as the Urals, Siberia, the Far East and Moscow.
Furthermore, Société Générale will take up an additional 10% with the implementation of a co-operation agreement with Interros, and at the same price paid for the initial stake.
The deal will significantly increase Société Générale’s presence in Russia, a country that the French bank has recently been wooing. Last year, it acquired Promek Bank through Rusfinance, its consumer finance subsidiary in Russia. It has also negotiated the purchase of SKT Bank, another consumer finance outfit, and DeltaCredit, a mortgage lender.
In a corporate statement, Interros said: “The principle of a future flotation remains a shared goal of the two partners.”
Belgium’s Dexia has agreed to acquire a 75% stake in Turkey’s DenizBank for $2.44bn. Dexia aims to become an important player in Turkey’s fast-growing market, by developing both retail operations and its project finance franchise in the country. Dexia plans to finance the acquisition through a €1bn capital increase.
Nordea’s Russian search
Sweden’s Nordea has announced it is looking to buy a Russian lender with a strong retail franchise and between 30 and 40 branches. Nordea already has a presence in Russia with its stake in International Moscow Bank (IMB), which will be sold before buying the new bank. The buyer is UniCredit, the Italian bank that has a controlling stake in IMB. The transaction is expected to be completed by the end of the year.
UK investment bank Evolution Group has announced the acquisition of its loss-making rival Williams de Broë for £15m. The price is half of what the City reportedly expected Evolution to pay. Evolution will take on Williams de Broë’s institutional and retail divisions. ING Groep, the broker’s parent, will book an after-tax loss of €20m on its accounts in the second quarter for the sale.
Australia’s Macquarie and Iceland’s Kaupthing were among the other banks competing for the acquisition.
Sabadell gains subsidiary
Spain’s Banco Sabadell has announced an agreement with KBC to acquire its Spanish subsidiary Banco Urquijo for €760m. Banco Urquijo focuses on private banking and asset management. It will merge with Sabadell’s private banking brand, Sabadell Banca Privada, and operate a network of 16 branches asBanco Urquijo SBP.
Madrid-based Grupo Santander has completed the acquisition of about 20% in US Sovereign Bancorp, parent company of Sovereign Bank, with a total investment of €1.86bn, consisting of subscription to a capital increase of Sovereign and a share purchase. Santander expects to increase its stake in Sovereign to just below 25% and may bring its stake to 100% in the next two years. Sovereign will use the proceeds to acquire New York-basedIndependence Community Bank Corp for $3.6bn.
Switzerland’s Credit Suisse has announced it will set up a $1bn joint venture with General Electric to invest in infrastructure assets, ranging from power stations to gas pipelines and toll roads. This follows moves by Australia’s Macquarie Bank, which has invested in toll roads and airports.
UBS in ABN AMRO deal
Zurich-based UBS is to acquire the global futures and options business of Dutch bank ABN AMRO for $386m. UBS aims to increase its futures and options market share. The transaction is expected to close in the third quarter of 2006.
UBS has also announced its plans to offer wealth management, asset management, rouble fixed income and foreign exchange services to the Russian market. The bank has received a banking licence from the Central Bank of Russia, enabling it to expand its business in the country.
Austria’s Raiffeisen International has agreed to sell JSCB Raiffeisenbank Ukraine to Hungary’s OTP Bank for €650m. Raiffeisenbank Ukraine had total assets of more than €1.2bn and 39 branches at the end of 2005. Raiffeisen says the sale will eliminate the costs of the merger with Bank Aval, acquired in 2005.
NYSE merger agreed
The New York Stock Exchange and Euronext have agreed to merge and form a new group, to be called NYSE Euronext. The new group will have a combined market capitalisation of about $20bn, with global operations in cash equities, derivatives, market data and technology. The two exchanges estimate that the group’s average daily trading value will be approximately $100bn, and it will have a total market capitalisation of listed companies of $27,000bn.
Joint equity index
Citigroup and Standard & Poor’s have designed a new research-based equity index of stocks with high growth potential, called Citigroup S&P Global STARS Custom Index. The index is based on S&P’s equity research and stock recommendation system. It consists of 25 stocks from Europe, the US and Asia.
New York-based Morgan Stanley has bought Oxhead Capital Management, a hedge fund based in Boston, for an undisclosed consideration. Oxhead has $100m in assets under management and was founded by three professionals formerly at US money management firm Putnam Investments.
Toronto-based investment bank GMP Capital Trust is to purchase Canadian buyout fund EdgeStone Capital Partners for a total consideration valued at about C$155m ($138m). The deal is expected to boost GMP’s profitability.
Greenhill enhances M&A
New York-based investment bank Greenhill has agreed to acquire Canadian advisory firm Beaufort Partners to capture a share in the mergers and acquisitions market. The deal will give Greenhill a significant presence in Canada. Beaufort Partners was formed only last year by George Estey, former Canadian president of Goldman Sachs, and Bradley Crompton, former head of Morgan Stanley’s Canadian operations.
Dutch bank ABN AMRO has agreed to partner with Chinese broker Haitong Securities. It is believed that the move will lead to an equity purchase. The two banks will explore tie-ups across a range of businesses, including corporate finance services, asset securitisation, cross-border capital raising and financial market products. Other foreign banks, such as Canada’s Bank of Montreal and New York-based JPMorgan Chase, have reportedly considered buying a stake in Haintong.
The China Banking Regulatory Commission has said it will allow banks to extend their business to insurance and securities, reinforcing the trend towards a greater expansion of financial services beyond existing boundaries. The commission is also in favour of insurance companies buying stakes in commercial banks.
China Development Bank has signed a co-operation agreement with the Postal Savings and Remittance Bureau (PSRB), now an arm of China Post, the country’s mail service provider. The agreement is expected to pave the way for PSRB to manage its loan system when it turns into an independent banking institution shortly. Under the agreement, the two institutions will team up in sectors including asset management, capital use, consulting services and settlement.
Citi’s China move
Citigroup is in talks with China Life, China’s largest life assurer, as well as other Chinese companies, about joining its $3bn bid for a controlling stake in Guangdong Development Bank (GDB), following the central government’s refusal to relax foreign investment rules for the acquisition. GDB is the first Chinese bank to offer a majority stake to a foreign-led consortium.
The Dubai Financial Services Authority has become a signatory to the multilateral memorandum of understanding (MOU) with the International Organisation of Securities Commissions (IOSCO). The initiative covers consultation and cooperation and the exchange of information between the authority and IOSCO. It responds to the increasing international activity in the securities and derivatives markets in the area.
Also, the Qatar Financial Centre Regulatory Authority has announced the signing of an MOU with the Bahrain Monetary Agency. The MOU establishes a framework for co-operation in the supervision of financial institutions operating in the Qatar Financial Centre and Bahrain.
UIB takes a stake
Bahrain-based Unicorn Investment Bank (UIB) has bought a 20% stake in First Dawood Islamic Bank, a start-up based in Pakistan. The deal will allow UIB access to Pakistan’s large and predominantly Muslim market. Islamic deposits are expected to reach 10% of total deposits in 2014, from less than 1% in 2004.
London-based Barclays has launched a mortgage service in Dubai, capitalising on the large scale of property developments in the area. The service is in line with Barclays’ plans to increase profits generated outside the UK by 50% in three years.
