Translated material
Renaissance Prokhorov
The billionaire will become one of the largest investment bankers in Russia
Businessman Mikhail Prokhorov, through his Onexim group, buys half of one of the largest Russian investment banks, Renaissance Capital . Both sides say they are creating the largest player in the market, which will have no competitors. Vremya Novostei's interlocutors put forward a different version of what happened: Renaissance, like many other investment banks, is experiencing financial problems due to the crisis, and this sale will allow it to stay afloat.As stated in the official statement, Onexim will acquire 50% of the share capital of the investment bank Renaissance Capital by purchasing an additional issue. Renaissance Group will control 50% plus one voting share of the bank. According to Onexim CEO Dmitry Razumov, Onexim will contribute $500 million to the bank’s authorized capital: “This is not the nominal cost of purchasing shares, this is the acquisition price of 50%.” The bank will receive another part of the funds through credit lines. It is still unknown how much money Onexim will provide to Renaissance Capital; according to Mr. Razumov, this money will be enough for the further development of the bank. “The deal to purchase a 50% stake in Renaissance Capital is in the process of being implemented, and more than half of the purchase price will be transferred today,” Mr. Razumov said yesterday, adding that the deal is expected to close after receiving the appropriate regulatory approvals. "We don't expect any problems getting their consent," he added.
The deal does not apply to other assets of the Renaissance Group - Renaissance Credit Bank, Renaissance Asset Management and Renaissance Partners. The main owners of the group are its founder and chairman of the board, Stephen Jennings, as well as top managers Richard Olfert and Alexander Pertsovsky.
“Thanks to this transaction, the parties intend to create “the strongest financial structure with the capabilities, expertise, experience and ambitions to be the absolute leader in all its priority markets. At a time when many of our competitors are weakened, our unique alliance, backed by significant capital and a professional, motivated team, will enable the company to realize maximum business growth opportunities,” says Mr. Jennings. According to Mr. Prokhorov, the alliance will have no competitors in the investment banking market. Now the volume of Onexim's assets is more than $25 billion. It is noteworthy that just over ten years ago Renaissance announced plans to become the largest Russian investment bank. Then Mikhail Prokhorov’s ex-partner Vladimir Potanin initiated the merger of the MFK bank he owned with Renaissance Capital. The capital of the new structure would have been $400 million. However, these plans were interrupted by the 1998 crisis, and the merger never took place.
Market participants are more restrained in their assessments regarding the future fate of Renaissance. They note that Mr. Prokhorov is becoming the largest shareholder of the company (after all, the remaining stake is dispersed among top managers), and, most likely, he will actively interfere in its management. And according to one of the newspaper’s interlocutors, “it’s hard to imagine that two stars like Prokhorov and Jennings can live peacefully in the same boat.”
Renaissance has found a partner from whom it can receive funds for the development of its current business. The situation is extremely difficult, and the liquidity crisis has not yet been completely resolved,” Andrei Shemetov, general director of the Aton company, told Vremya Novostei.
And Vremya Novostey’s interlocutor at a large Russian investment bank, who wished to remain anonymous, emphasizes: “This investment bank, like many other Russian financial institutions, has experienced a liquidity shortage in recent weeks. Everyone has the same problems - due to the collapse of the stock market, obligations under repo transactions have become stuck. It's no secret that many banks are now looking for a buyer for their assets in the hope of supporting their business. And “Renaissance” is no exception, although, perhaps, they solved their problems most quickly.” Yesterday, no agreement was reached on the sale of KIT Finance to the management company Leader.
The top manager of a Western investment bank is more categorical in his assessment of the market situation and the deal between Onexim and Renaissance. “What is happening in Russia now testifies to the unviability of the investment business model that has been built in the country over the past ten years. Domestic brokers invested in low-liquid assets, counting on their further growth. This strategy is justified in a growing market, but is by no means designed for the current situation. As a result, these companies now find themselves in a difficult situation and do not know what to do,” notes the newspaper’s interlocutor. — Two years ago, VTB was negotiating the purchase of Renaissance. At that time, the company was valued several times more expensive than now, when Onexim paid only $500 million for half of Renaissance. It is possible that other major market players, including Troika Dialog, will find a partner in the form of a large company or the state bank."
However, as Ruben Vardanyan, head of Troika Dialog, told Vremya Novostei yesterday, his company is not currently negotiating a sale. In addition, in his opinion, the main events have already occurred and there will be no major changes among the main market participants. “There will probably be merger deals in the banking sector, but not among large Russian investment companies,” Mr. Vardanyan believes. Mr. Shemetov does not agree with him: “We see that now many companies and banks have significant problems with liquidity, and it seems to me that we will hear more than one such transaction. There will be problems for both brokers and investment banks. Liquidity problems will continue for two months, and during this time, most likely, someone will not be able to cope, and there is still nowhere to raise funds. So “KIT Finance” and “Renaissance” are the first signs.”