The Russia Direct Investment Fund, a Kremlin-backed private equity fund, is teaming up with Cartesian Capital Group LLC to buy a stake worth about $160 million in the Moscow Exchange ahead of the bourse’s share sale next year.
RDIF bought a 1.45 percent holding from ZAO UniCredit Bank, a unit of Italy’s UniCredit SpA, according to RDIF Chief Executive Officer Kirill Dmitriev. New York-based Cartesian, which was founded by former AIG Capital Partners Inc. President Peter Yu, has acquired stakes of 1.9 percent and 0.6 percent from UniCredit, Dmitriev said by phone yesterday.
The Kremlin established RDIF a year ago to help lure foreign investment in an effort to wean the world’s largest energy supplier off its dependence on commodity exports. The deal is Cartesian’s first in a Russian company.
Revenue at the exchange will “dramatically increase” as President Vladimir Putin’s government takes steps to develop the country’s financial markets, Dmitriev said.
The planned IPO “is going to be more successful and the operations of the Micex will be strengthened thanks to the expertise that Cartesian brings to the table,” he said.
The Moscow bourse, led since 2010 by former banker Ruben Aganbegyan, was created when the Micex Stock Exchange merged with the RTS Exchange in December, and offers stock, bond, currency and futures trading. The Moscow Exchange will seek more than $1 billion in its IPO next year “when a market window is there,” Aganbegyan said in an April 17 interview in New York.
Goldman Sachs Group Inc., BlackRock Inc. and Templeton Asset Management Ltd. signed an accord with RDIF on June 21 to invest in Russian companies preparing for IPOs. While the deal with Cartesian isn’t part of this partnership, “future deals may come out” of it, Dmitriev said.
“The exchange and the regulators need to create rules that make the local capital markets as attractive as the competing foreign markets, such as London,” Yu, who manages about $2 billion in emerging-market assets as a managing partner at Cartesian, said by phone today. “Institutional investors need to continue to expand their equity allocations to participate in the growth of the market. The more there are natural buyers, the stronger the IPO market is going to be.”
Cartesian is investing “long-term” in the exchange, Yu said. The private equity firm bought a franchise for Burger King restaurants in China this year.
RDIF’s stake will increase to 2.7 percent after the purchase, Dmitriev said. The fund acquired 1.25 percent in January in a joint deal with the European Bank for Reconstruction and Development, which obtained 6.29 percent of the bourse.
The total 3.9 percent stake that RDIF and Cartesian are buying is worth about $160 million, based on a 129 billion ruble ($4 billion) estimate for the value of the bourse by Tatyana Elizarova, an analyst at IFC Metropol.
Other shareholders include Russia’s central bank and OAO Sberbank, the nation’s biggest lender, according to data on the exchange’s website.
UniCredit, which sold the stakes in the bourse to RDIF and Cartesian, is closing its securities unit in Russia and will cease to carry out cash-equity business for central and eastern European shares in New York and London, according to a statement in June.