Privatization in CEE

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Privatization in CEE. Giovanni Salvetti, Managing Director, CEE Coordinator. AFG. 22 October 2009. Contents. Introduction to Rothschild Privatization in CEE The Belorussian case Focus on the financial sector Conclusions. 1. 2. 3. 4. 5. - PowerPoint PPT Presentation

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  • Privatization in CEEGiovanni Salvetti, Managing Director, CEE Coordinator22 October 2009AFG

    *A

    ContentsIntroduction to Rothschild

    Privatization in CEE

    The Belorussian case

    Focus on the financial sector

    Conclusions12345

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    1. The Rothschild Group1.1 A distinguished history few key dates

    220p240p260p280p300p320p340p360p380p176918151845184718831962Currently, Rothschild has become a leading sovereign advisor globally and especially in the Central and Eastern Europe

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    950 corporate finance bankers worldwide640 in Europe including CEE and Russia125 in US and Canada95 in Asia30 in Australia25 in Latin America 35 in Africa and MECorporate finance bankers48 Rothschilds offices in 34 countriesOver 3,000 employees of which c. 950 bankers1.2 Strong international network with major European presence and strong local footprint1. The Rothschild Group

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    1. The Rothschild Group1.3 Integrated corporate finance advice across:Completed deals by number (1 Jan to 31 Dec 2008)Source Thomson Reuters 2 Jan 2009Completed deals by number (1 Jan 2000 to 31 Dec 2008)Source Thomson Reuters 5 Jan 2009

    European M&A

    US$bn

    No

    1

    Rothschild

    250.3

    216

    2

    JP Morgan

    617.0

    191

    3

    Deutsche Bank

    356.8

    175

    4

    Merrill Lynch

    427.1

    170

    5

    UBS

    405.7

    158

    6

    Morgan Stanley

    377.1

    155

    7

    Credit Suisse

    318.7

    149

    8

    Goldman Sachs

    475.5

    135

    9

    Lazard

    232.4

    134

    10

    Citi

    408.2

    128

    European Privatisation M&A

    US$bn

    No

    1

    JP Morgan

    172.0

    56

    2

    Rothschild

    144.7

    50

    3

    Merrill Lynch

    175.3

    43

    4

    BNP Paribas

    144.3

    39

    5

    Morgan Stanley

    158.7

    35

    6

    UBS

    131.5

    34

    7

    Lazard

    126.6

    30

    8

    Goldman Sachs

    154.8

    24

    9

    Nomura

    124.2

    22

    10

    Calyon

    125.6

    14

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    1. The Rothschild Group1.4 Awards as strong testimony of Rothschild excellenceDeals of the Year 2008:UK: Tata / CorusM&A Bank of the YearDebt Advisory House of the YearGerman M&A Adviser of the YearHealth & Pharma Adviser of the YearRestructuring Deal of the Year: EurotunnelDefence of the Year: Altadis2008 & 2007 UK Financial Adviser 2008 Italy Financial Adviser 2008 Visegrad Financial Adviser 2008 & 2007 Mid-market Adviser

    Debt Advisory House of the YearRestructuring Adviser of the yearCross-border Deal of the Year: Scottish & Newcastle2009 Best LBO Advisory Bank of the Year2009 Restructuring House of the Year2009 Best InternationalInvestment Bank in ItalyEuromoney Awards for Excellence 2009 Best Global Sovereign AdvisoryPrivate Equity.fr 2009 & 2007 M&A Adviser of the YearFrance and Latin AmericaInvestment Bank of the Year 2009

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    2. Rothschilds government advise2.1 Leading privatization adviserCountries in which Rothschild has advised on privatisations (incl. M&A transactions)North AmericaNo.of countries: 6No. of transactions: 29Amount raised (US$bn): 10.7South AmericaNo.of countries: 7No. of transactions: 47Amount raised (US$bn): 28.3EuropeNo.of countries: 27No. of transactions: 186Amount raised (US$bn):464.1Middle East and AfricaNo.of countries:14No. of transactions: 32Amount raised (US$bn): 4.8AsiaNo.of countries: 9No. of transactions: 40 Amount raised (US$bn): 190.9Australia & NZNo.of countries: 2No. of transactions: 29Amount raised (US$bn): 39.3

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    3. Rothschild CEE expertise3.1 Rothschilds activity in CEE region2006: 52m disposal of Skarbiec asset mgmt holding2007: 64m disposal of 60% stake in Agros Nova

    2007: Disposal of Dominet Bank by Cacek Family and Merrill Lynch2007: 122m disposal of PTE Skarbiec Emerytura to Aegon2006: 82.6m fairness opinion on public tender offer for 13.01% of Netia2006: 123m offer for Broker FmPolandGovernment of Serbia2006: 1.51bn disposal of Mobi 63SerbiaAlbaniaSloveniaBulgariaHungary2007: $5.4 bn combination with Gedeon Richter2006: US$44.6m opinion on disposal of asset mgmt operations2007: Sale of 60% of Expander by GE Money to Innova Capital2005: 172m merger with Provimi PolskaCroatia2007: Acquisition of 91% of Dukat (EV of 345m)

    Government of Serbia2003: Advisory on the restructuring of NIS - oil companyCzech Rep.Ukraine2006: US$1.2bn acquisition of a majority stake in Ukrsotsbank

    2005: Acquisition of Ukrainian P&C insurer Skide West2008: US$750m disposal of Pravex Bank to Intesa Sanpaolo SpA 2007: Acquisition of Funni Corporation, the 4th largest Ukrainian dairy company 2006: 1.3bn acquisition of a 75% stake in Budapest Airport2006: 157.7m acquisition of a 74.3% stake in DZI Bank

    2004: Acquisition of Queens Juices

    2005: Advisory to Banca Intesa on Delta Banka acquisitionRomania2007: Acquisition of a 93.32% stake in Kandia-Excelent2006: 3.75bn acquisition of 62% stake in Banca Comerciala Romana2005: 430m merger with HVB Bank Romania2005: US$47.3m disposal of 78.5% of stake in Romportmet2008: Advisory on disposal of Romanian second largest insurerLithuania 2004: Acquisition of Nord / LB insurance operations2008: Acquisition of DISA from Procuritas Capital Investors

    2006: US$40.8m disposal of a 80% stake in Banca Italo AlbaneseCurrent: 2.3bn recommended cash offer for Zentiva NV by Sanofi-Aventis S.A.2006: 120m disposal of a 50% stake in Modra Pyramida Stavebni Sporitelna2004: Acquisition of food brands Sunar, Sunarek & Sunarka from HeinzCzech Republic2006: Acquisition of Transcentrum Bus s.r.o.Government of Slovenia2002: 435m privatisation of 34% in Nova Banka to KBC RussiaRomaniaHungaryBulgariaCroatiaSloveniaAlbaniaSerbiaCzech RepublicPolandUkraineMoldovaSlovakiaBosnia andHerzegovinaLatviaEstoniaMacedoniaBelarusLithuania

    2009:Restructuring of Nadra bank debt with Export Credit Agencies2009: combining Telenors and Altimos holdings in OJSC VimpelCom and Kyivstar2004: Acquisition of juice producer Olympus Top

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    4. Privatization in CEE4.1 Key phases Privatization is a key pillar of the economic transformation programmes launched by CEE governments in early 1990s

    All CEE privatization programs started almost simultaneously during 1989-1992

    In general, almost all CEE governments applied a very similar mix of methods to privatize their economies with slight but in some cases sensible differences in their implementation

    Early and mid 90s were marked by:Mass voucher privatizations across the region (with some rare exceptions), mainly driven by social and economic transformation needsThe first CEE pilot privatizations (5-10 companies) using controlled method (trade sales and IPOs)Active management and employees buyouts (the most fast and simple way to privatize the companies which were risking to go into bankruptcy) Establishment of stock exchange and capital market infrastructure

    In late 90s and until 2007 CEE privatizations were dominated by controlled methods, aiming to maximise proceeds and develop local stock market through "national champions" listings

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    4. Privatization in CEE4.2 Disclosed privatization proceeds in CEE: landscape< USD 5 bn> USD 5 bn> USD 10 bn> USD 20 bnRussiaHungarySloveniaCzech RepublicPolandUkraineMoldovaSlovakiaBosnia andHerzegovinaLatviaEstoniaLithuaniaBulgariaAlbaniaSerbiaMacedoniaBelarusCroatiaSource World BankRomaniaTotal proceeds 1989-2007

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    4. Privatization in CEESource EBRDSource EBRD4.3 Current landscape: private sector developmentPrivate share in GDP (%)2008 private share in GDP (%)CEE governments economic transformation efforts resulted in a robust private sector development which 2008 accounted for average 70% of GDP

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    4. Privatization in CEE4.4 Privatization methods: voucher/coupon This method was widely spread at the first stage of CEE privatizations in early 1990sMain goal:Quick and socially fair transfer of state controlled companies to private ownership Establishment of economically independent and competitive businesses, capable to mobilize / manage effectively the available resourcesFast establishment of a local capital market and stock exchangeApplied widely in CEE and Russia but to a lesser extend in Poland and Hungary

    Managing entity: various but generally Ministry of Finance, Economy and Treasure, Privatization Agency (PA)State companies were transformed into joint stock companies Employees and all citizens were offered vouchers (freely transferrable), convertible through auctions into shares of selected state-owned companies Two options for voucher holders:To put vouchers into specially created mutual funds (i.e. Poland) to which the companies stakes are assigned To sell them to other individuals (i.e. Russia), to private funds, and brokers (i.e. Russia, Czech Republic)Voucher methodImplementation

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    4. Privatization in CEE4.4 Privatization methods: voucher/coupon (contd)Push for local capital market development (i.e. Poland)Quick transformation into private ownershipEncouraging the ownership of shares among the broad layers of the population

    Low proceeds and high management costsWeak legal framework of vouchers trading (i.e. in Ukraine vouchers were personally assigned to every citizen and could be sold only through a complicated auction system)No guarantee of management efficiency improvementNo large scale restructuringNo guarantee for further investment plans / recapitalizationsInvestment funds were often favoured comparing to citizens (i.e. Czech Republic)Excessive fragmentation of the ownershipIn certain cases resulted in unfair redistribution of wealth Pros of voucher/cou