OAO Sberbank, the state lender that holds roughly half of Russians’ savings, agreed to buy Troika Dialog to move into investment banking as Prime Minister Vladimir Putin’s government embarks upon its biggest asset-sale program since the 1990s.
State-run Sberbank agreed to pay $1 billion for 100 percent of Troika, including the 63.6 percent held by Chairman and Chief Executive Officer Ruben Vardanian and his partners and 36.4 percent held by Johannesburg-based lender Standard Bank Group Ltd., Sberbank Chief Executive Officer German Gref told reporters in Moscow today. The lender will also offer an earn-out, or payment tied to performance, to shareholders after three years, he said.
“The united business will immediately have leading positions on several fronts,” Gref said. The purchase is a “landmark, logical” deal that will make Troika Russia’s “No. 1 or No. 2” for investment banking services, including mergers and acquisitions, share and bond sales, he added.
The acquisition of Russia’s oldest investment bank moves Gref closer to achieving his goal of turning 170-year-old Sberbank into a full-service financial company offering products from stock trading to bond underwriting that can compete internationally. Gref stepped down as economy minister to run the former Soviet savings bank in 2007.
‘Expand and Develop’
“It’s an example of a widening state presence in our financial markets,” Ovanes Oganisian, a strategist at Renaissance Capital in Moscow, said by phone. “It’s hard to compete sometimes with state banks especially if they take advantage of their links to the government and the regulators.”
Sberbank’s shares advanced as much as 0.5 percent after the announcement, and closed down 0.9 percent at 98.74 rubles at 6:45 p.m. in Moscow. Standard Bank jumped for the first day in four, adding 1.3 percent to 97.33 rand at the close of trading in Johannesburg.
Vardanian will stay on as Troika’s Chief Executive at least through 2013 and Gref will head the company’s supervisory board as the state-owned bank consolidates its holdings, Sberbank CEO said.
Sberbank will “expand and develop” Troika’s existing offices in London and New York as part of its drive to offer investment banking services internationally, Gref said.
Citigroup Inc. yesterday said it hired four former Troika Dialog bankers, including Kingsmill Bond, its chief strategist who was rated top Europe, Middle East and Africa analyst for the past two years by Institutional Investor magazine. Citigroup also hired Andrey Kuznetsov,a Russian equity strategist, Kirill Kazanli, an infrastructure analyst, and Will Hammond, who was previously head of equity sales, according to an e-mailed statement from Citigroup in London.
Andrei Kostin, head of Sberbank’s smaller rival VTB Group, started an investment bank from scratch in 2008 that has since become the biggest arranger of debt for Russian companies, eclipsing foreign competitors such as Deutsche Bank AG.
Standard Bank executives were “reluctant sellers” of their stake in Troika, Jacko Maree, the Johannesburg bank’s chief executive officer, said in statement. Standard Bank, which acquired Troika shares in 2009, may start a small Russian office “from scratch” to maintain a presence in the country, Maree told reporters on a conference call today.
The “representative” office would probably have up to 10 people working Russian-African deals, particularly in the mining industry, according to Simon Ridley, Standard Bank’s finance director.
The additional payout to shareholders will be 50 percent of average annual net income over the next three years, multiplied by 13.5, minus the $1 billion Sberbank paid today for the acquisition, Gref said. Troika’s average annual profit in 2011 to 2013 is expected to be around $200 million, he added.
Sberbank and Troika are among 23 domestic and foreign banks that Putin’s government selected last year to help raise at least 1 trillion rubles ($34 billion) selling assets over the next three years, including shares in Sberbank. The government raised $3.3 billion on Feb. 14 selling a 10 percent stake in VTB.
Troika’s Russian competitor, Renaissance Capital, was forced to sell 50 percent of its shares to billionaire Mikhail Prokhorov for $500 million in September 2008, amid a record rout in Russian stocks. That was 18 months after Renaissance rejected a $4 billion offer from VTB, the Vedomosti newspaper reported at the time.
“This is a good fit,” Oganisian said. “Troika is the Sberbank of the Russian investment banking scene and has branches in the regions. This deal with will bring brokerage services to the babushkas and the wider population.”
-- With assistance from Sikonathi Mantshantsha in Johannesburg. Editors: Brad Cook, John Kohut, Ana Monteiro.