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Ukraine’s Aval starts negotiations on sale to RZB

Austria’s Raiffeisen International (RZB) is in exclusive takeover talks with Ukraine’s second-largest commercial bank, Aval. “We are in talks that we have agreed will be mutual until May,” said the chief executive of Raiffeisen International, Herbert Stepic. “We want to take over the bank entirely.”
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Aval said that RZB had already begun performing due diligence and that no price has been agreed on. Analysts estimate the bank is worth $600m and earned a profit of $3.4m in 2004. Local experts believe that Aval’s management will maintain a sizable stake in the bank, but hand over control to RZB.

Aval’s chairman Olexander Derkach had stated earlier this year the bank intends to attract a large foreign investor.

RZB is already by far the largest foreign-owned bank in Ukraine and the takeover forms part of its plans to expand in central and eastern Europe. The bank starts a road show in April ahead of the sale of between 20% and 30% of its shares, which it hopes will raise between €700m and €1bn to finance further expansion.

Aval was already in talks with RZB over selling a stake to the Austrians but, following the victory of Viktor Yushchenko, Aval’s management seems to have decided to leave Ukraine’s banking sector altogether.

Aval Bank is closely associated with the Donetsk business clan and Ukraine’s biggest industrial group, the Investment Metallurgical Union (IMU), which is also based in Donetsk.

The region is home to Mr Yushchenko’s most ardent opponents and fought vigorously in support of the former prime minister, Viktor Yanukovych, in December’s presidential elections.

The IMU has already felt the wrath of the new administration, which has cancelled November’s disputed privatisation for Ukraine’s biggest steel mill Kyvorizhstal, won by IMU at knock-down prices.

Mr Yushchenko says that the mill was “stolen” and that the state hopes to get “two to three times” more for it when it goes on sale again later this year.

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