Micex move on RTS to pave way for single Russian exchange

The announcement of a deal for the MICEX to buy out the RTS, after months of talks about a possible merger, paves the way for a unified Russian exchange and is set to boost Russian government plans to increase Moscow’s prominence as a global financial cen

­On Tuesday the central bank’s first deputy chairman, Alexei Ulyukayev, stated that shareholders in the MICEX, has signed a non-binding agreement signaling their intent to acquire a controlling stake in the RTS.

The rouble denominated MICEX currently accounts for about 80% of equities trading in Russia, with the internationally better known, and dollar denominated RTS accounting for the rest.  A merger of the two, long called for by many market players, underpins the possibility of a single Russian trading platform for equities, derivatives, and financial instruments, as well as providing for considerable commodity trading. 

Alexei Ulyukayev stated that the merger was intended to boost Russian stock market liquidity and enhance market infrastructure, including clearing and depositary operations. He added that the deal would value the MICEX at $3.45 billion and the RTS at $1.15 billion, with the Micex to pay for 35% of the controlling stake in the RTS through cash, and the rest through a share swap.  He also noted that the two sides were expected to sign a binding merger agreement by the end of April with only a force-majeure event to delay this.

The Central Bank of Russia, which has a 29.8% stake in the MICEX will sell its stake in the merged entity through an IPO, currently planned for within the next three years.  The major RTS shareholders are Troika Dialog, with a 10% stake, Alfa bank (9.6%), and Deutsche Securities (9%).

Speaking at the Troika Dialog, Russia Forum 2011,MICEX CEO, Ruben Aganbegyan said the link up between the two exchanges is good news for the market.

“Obviously working together with our partners from RTS – having joint exchange and achieving, getting liquidity together and moving that forward is a great and very important goal in my view – infrastructure goal, and great for the market.”

RTS Chairman, Jacques Der Megreditchian, also speaking to Business RT at the Russia Forum 2011, said he believes the protracted negotiations have led to a fair deal, with time ahead to smooth out merger issues.

“The deal I think is quite fair for both sides.Its 35% cash and 65% is the exchange of shares. And I think, as I said, it’s a good first step. After that we have 3 months to go through all the legal documents and work a little bit on the organization of the combined entity.But I think it’s a positive, a positive for the Russian market.”

Maxim Rozenblit Development director at IFC Metropol, believes the news has been anticipated by the markets for some time, and won’t initially generate significant new listings in Russia, but he adds that it does help lay the basis for an increased longer term interest in Russian markets.

“This merger is a general deal that has been very protracted.  It is not likely to be more competitive with other major world exchanges as they have already built their base and grown their volumes.  I don’t think the move, of itself, will attract new Russian companies or foreign companies to list in Russia as there isn’t enough access to a pool of attractive investors – they are historically attached to other exchanges. 

All new establishments and reform should be well examined by investors. However the bulk of trading funds have restrictions concerning the rank of security trading, risks and admission to trading on other exchanges. In the long term perspective Russian Stock exchange can become attractive and maybe more focused on foreign companies and investors. A Russian exchange is absolutely equal to the international technological standards. It may be also interesting if Russian exchange will start trading in Russian depositary receipts.”