Polish Bourse IPO to Spur `Little London' Trading Hub

The Warsaw Stock Exchange, preparing for an initial public offering, plans to become the hub for stock, bond and derivatives trading in the region, emulating London, Chief Executive Officer Ludwik Sobolewski said.

“We want to create a little London, attracting international listings and capital here,” Sobolewski said in an interview in London today. We “have a strategy of building a financial hub in Warsaw,” he said.

Poland is seeking to sell 64 percent of the country’s only bourse as part of the government’s program to raise 25 billion zloty ($8.7 billion) to help finance the 2010 budget deficit. While Warsaw has become central Europe’s biggest equity market by luring companies to list from the Czech Republic to Lithuania, the bond market has been “neglected for years,” Sobolewski said.

Financial companies and real-estate developers are likely to sell bonds listed on the stock exchange, after Polkomtel SA, the country’s largest mobile phone operator, raised 1 billion zloty last month in the first such transaction on the Polish market. City authorities in Poznan and Gdansk are planning “significant” bond sales on the exchange’s so-called Catalyst platform, Sobolewski said.

Company listings from Ukraine, which borders Poland, have “by far the biggest potential” for growth in coming years, Sobolewski said. The exchange has an office in Kiev and two Ukrainian companies are listed in Warsaw.

Photographer: Jin Lee/Bloomberg

Warsaw Stock Exchange Chief Executive Officer Ludwik Sobolewski said, “We want to create a little London, attracting international listings and capital here.” Close

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Photographer: Jin Lee/Bloomberg

Warsaw Stock Exchange Chief Executive Officer Ludwik Sobolewski said, “We want to create a little London, attracting international listings and capital here.”

‘Education’

The Warsaw bourse, created two years after the 1989 fall of communism, posted net income of 91 million zloty in 2009. The government has earned 20.8 billion zloty so far this year, selling stakes in insurance, energy, telephone, copper and coal mining companies.

The exchange started “education meetings” with fund managers this week and will make presentations to discuss its IPO prospectus from Oct. 15 through Oct. 28, according to a term sheet obtained by Bloomberg. Pricing is to be announced on Oct. 28 before the shares start trading Nov. 9.

The company, which will be the first publicly traded exchange operator in central Europe, is awaiting approval for the IPO from the country’s financial-services regulator after filing its prospectus. It’s the second exchange IPO this year, following a June listing by CBOE Holdings Inc., the last major U.S. securities exchange owned by its members. CBOE raised $339 million selling 11.7 million shares at $29 each after offering them at $27 to $29.

Developed Market

Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co. and UBS AG will be the IPO’s global coordinators. Ipopema Securities SA, KBC Groep NV, Societe Generale SA, PKO Bank Polski SA, Bank Ochrony Srodowiska SA, Alior Bank SA, Banco Espirito Santo SA, IDM SA and Wood & Co. will also help manage the offering, according to the Treasury Ministry’s website.

The Warsaw bourse is the third-largest in emerging Europe after Moscow’s and Istanbul’s, with a market capitalization of $185 billion and 550 equities traded on its main market and NewConnect platform for smaller companies.

“We are somewhere between a typical emerging-market exchange and a developed-market exchange,” Sobolewski said today.

London Stock Exchange Group Plc trades at 10.7 times estimated 2011 earnings, NYSE Euronext, the biggest operator of U.S. stock exchanges, trades at 13.5 times and Nasdaq OMX Group Inc. is valued at 10.3 times, according to data compiled by Bloomberg.

IPO Leader

The heads of the largest exchanges gather in Paris next week for the World Federation of Exchanges annual meeting, with Xavier Rolet, chief executive officer of LSE, Duncan Niederauer, CEO of NYSE and Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd., sharing a panel to debate “Exchange Strategy.” The next day, Oct. 12, Robert Greifeld, chief executive of Nasdaq, Atsushi Saito, President of the Tokyo Stock Exchange and Thomas Kloet, who heads TMX Group Inc., owner of the Toronto Stock Exchange, discuss “New Forms of Trading.”

Poland has had the biggest number of IPOs annually in the region since at least 2004, data compiled by Bloomberg show. Companies in the country have raised $4.35 billion in 49 IPOs this year, with the largest offerings coming from energy utility Tauron Polska Energia SA and insurer Powszechny Zaklad Ubezpieczen SA.

Poland hosted 1.59 billion euros ($2.2 billion) of initial public offerings last year, placing it third in Europe behind NYSE Euronext and London, according to PricewaterhouseCoopers LLP. It has added 117 companies since the beginning of 2009. Prague hasn’t had an IPO since 2008 as trading volume dropped 53 percent during the past two years.

Overtaking Austria

The Warsaw Stock Exchange listings on the main market rose to 385 from 225 in the past decade. In the same period, the number of companies traded in Prague dropped to 26 from 151.

The new foreign listings have helped triple the value of Polish-traded shares to $189 billion since February 2009. The market is now bigger than Austria’s at $122 billion and the Philippines’s at $129 billion. Prague market capitalization is $47 billion.

“There will be a number of companies coming to market,” in the year ahead, Sobolewski said, declining to be more specific. State-owned companies that are being privatized are likely to be the biggest source of new listings, including from the chemical and energy industries.

Majority Stake

The Warsaw bourse in July agreed to acquire a new trading platform from NYSE Euronext’s Technologies, as central Europe’s biggest equity market seeks to upgrade its facilities after daily turnover more than doubled over the past decade. Trading in Warsaw surged to an average 1.73 billion zloty per day this year from 677 million zloty in 2000, when the present Warset system was installed, according to the bourse’s website.

Poland last year invited the London Stock Exchange Group Plc, NYSE Euronext, Nasdaq OMX Group Inc. and Deutsche Boerse AG to buy a majority stake in the Warsaw bourse. None of them placed a binding offer.

The exchange isn’t seeking an acquisition or a strategic partnership after the listing, Sobolewski said today.

“This is not the purpose, though I cannot exclude it obviously if something interesting appears,” he said.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net; Pawel Kozlowski in Warsaw pkozlowski@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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