Bulgaria Seeks Only Majors to Help Sell Stock Exchange - Report

Finance | March 21, 2012, Wednesday // 11:13|  views

Inside the building of the Bulgarian Stock Exchange in Sofia. Photo by Sofia Photo Agency

Bulgaria will seek to hire only major investment banks or consultancies to help arrange the privatization of the country's only stock exchange and depository, according to insiders.

There are two major eligibility criteria advisers should meet, Capital daily reported, citing parameters of the privatization procedure it has obtained.

The eligible advisers should have featured among Mergermarket's top fifteen legal advisers to M&A deals in Central and Eastern Europe, excluding Russia and the former Soviet republics, from 2005 to 2010. They also must have been hired for at least 10 deals worth EUR 5 B during the same period of time.

The requirements mean that consultancies like Bank of America, Merill Lynch и JP Morgan, as well as seven financial institutions, which have subsidiaries in Bulgaria - Unicredit Group, Deloitte, Deutsche Bank, BNP Paribas, Citigroup, Raiffeisen invesment and Societe General – are eligible advisers.

Bulgaria targets major global and European bourse operators for the sale of its only stock exchange and depository, which it hopes to wrap up in the first half of this year, according to insiders.

Bulgaria's government has packed together its stake at the stock exchange and the depository in a bid to sweeten the deal for the bourse privatization. The bundling ensures that the new owner will have the freedom to define its own policy on both trading and post-trading level.

The eligible candidates can be only stock exchanges, exchange operators or holding companies that own more than 50% of regulated markets. They can not be state owned, but must have a license for trading, according to unofficial information.

Potential buyers should have at least EUR 2 B monthly total turnover of market shares and/or average monthly derivative contracts of at least 2 million units for the last two years as of the end of 2011.

The requirements mean that Deutsche Boerse and the London Stock Exchange are eligible bidders, but not the Warsaw Stock Exchange, experts say.

An official list of requirements that bidders should meet is expected to be submitted to the Agency for Privatization and Post Privatization Control (APSK) within days.

Bulgaria's only stock exchange became a public company in the middle of December 2010 after the Financial Supervision Commission approved its prospectus and the bourse was listed on its own platform. The capital of the bourse is a total of BGN 6 582 860 at BGN 1 apiece.

Bulgaria's Finance Ministry raised at the beginning of October its share to 50% plus one share from 44% in the country's stock exchange. The government bought 715,000 shares at BN 1 apiece.

The shareholders said the move aims to ease the future privatisation of the exchange and the search for a strategic investor.

Shortly after the Bulgarian Stock Exchange launched the sale of its shares in January 2011, Finance Minister Simeon Djankov announced that there is a "huge" interest among investors, but declined to name them.

Meanwhile, in the middle of last year, the central bank transferred its 20% stake in the central depository to the finance ministry. The two thousand shares were purchased at their nominal value of BGN 100 apiece.

Following the acquisition of the central bank stake, the Finance Ministry holds a 44.9% stake in the central depository, whose capital totals BGN 1 M. The state privatization agency owns 1.8%.

Since 2008, the Bulgarian stock exchange has traded on the Deutsche Boerse's Xetra platform under a contract that expires in 2012. Bulgaria has discussed ways to sell its bourse stake over the past decade with Sweden's OMX AG and exchanges in Austria, Greece and Poland to boost interest in local stocks and make trading more transparent.

Sofia Stock Exchange has been the top performer in South East Europe during the first half of last year, according to a Financial Times ranking.

The region's top performer is Bulgaria with a rise of 29% in USD terms and 22% in local currency. According to FT data, that's the world's best in USD terms and second only to Zambia in local currency.

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Tags: depository, sofia, Bulgaria, stock exchange, Finance Ministry, Bulgarian Stock Exchange, Victor Papazov, Financial Supervision Commission, finance minister, Simeon Djankov, Ivan Takev, Deutsche Boerse, London, Warsaw, Xetra, Sweden's OMX, Austria, greece, Poland, Mergermarket


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