Monday, 20 August 2007

Serious business as usual in the silly season

Financial News

Letter from Moscow

Jason Corcoran

20 August 2007

The Russian silly season is in full swing. A submarine has planted a flag on the Arctic seabed, former President Mikhail Gorbachev is the face of luxury luggage label Louis Vuitton and President Vladimir Putin has been photographed fishing topless with Prince Albert of Monaco.

The August vacation may be well under way but some serious business is being conducted from Moscow as billionaire Oleg Deripaska generates enough news to power one of his aluminium plants.

With Putin on an adventure holiday in Siberia, his favourite oligarch has taken centre stage with several bold moves. Deripaska, whose estimated $20bn fortune includes Rusal, one of the world’s largest aluminium companies, looks set to take over privately owned oil company RussNeft and has emerged as a 5% shareholder in US carmaker General Motors.

Basic Element, Deripaska’s holding company, is seeking regulatory approval to buy RussNeft after its owner, Mikhail Gutseriyev, resigned, claiming he was forced out in a campaign by police and tax authorities.

Commentators have speculated that Basic Element is a vehicle for the purchase and RussNeft might end up in the hands of state-owned Rosneft or Gazprom.

Deripaska’s holding in General Motors is part of a spending spree in the automotive industry, including the UK’s LDV Vans last year and a pending $1.5bn minority stake in Magna International, a Canadian car parts maker. Basic Element also dabbles in aviation, insurance and construction and is in talks to buy half of Transstroi, Russia’s largest builder.

According to Forbes’ list of the world’s billionaires, Deripaska is the richest man in Russia along with Chelsea Football Club owner and one-time partner Roman Abramovich. Like his London-based friend, Deripaska owns a pile in London’s Belgravia and was said to be interested in buying rival Premier League team Arsenal.

However, Deripaska said he has no interest in moving from Russia, where he maintains a low profile. Indeed, the patriotic former Soviet army sergeant appears to continue serving his country after declaring recently that he regards himself as little more than a caretaker of assets for the state.

This led to concerns that these assets could wind up under control of the Kremlin, as outlined by Magna in a recent shareholder memorandum. Magna also disclosed that Deripaska’s US visa had been revoked because of questions about his business dealings. His rivals allege that he uses strong-arm tactics in hostile takeovers and is not easily dissuaded from backing down.

A one-time metals trader, Deripaska is a winner of the murky aluminium wars of the 1990s. Over the past five years, he has gained control of leading producer Russian Aluminium, which merged with Sual and Glencore last year to create Rusal.

When it conducts its initial public offering of as much as 25% of the group in November, Rusal could raise $7.5bn, making it one of Russia’s largest companies by market value. Yet Deripaska has been absent from investor presentations in London and New York. Rusal is keen instead to wheel out chief executive Alexander Bulygin to meet analysts and the press.

Rusal’s approach underlines how Russian companies looking to tap western capital markets are often keen to talk up their plans but remain reluctant to discuss their corporate histories.

Investors may have some tricky questions for Rusal but the sellside will have no such qualms, judging by the line-up of banks for the impending deal. Morgan Stanley, Deutsche Bank and JP Morgan Cazenove were last month appointed co-arrangers, and Goldman Sachs, Credit Suisse and UBS were mandated as bookrunners.

Friday, 17 August 2007

Top Alfa analyst leaves for Russian rival

Financial News

Jason Corcoran in Moscow and Harry Wilson
15 Aug 2007

One of Moscow's top strategists is set to quit his position to join a rival Russian investment bank in the latest high-profile move in the country's competitive job market.

Chris Weafer, chief strategist at Alfa Bank, one of Russia’s largest independent financial groups, will join Moscow-based rival Uralsib as a senior equity strategist, according to sources close to Uralsib.

Alfa Bank denied Weafer had plans to leave the firm. Weafer was unavailable for comment.

Weafer is one of the best regarded analysts in Russia and one of the top-ranked strategists in the market, frequently being voted among the best researchers in Institutional Investor surveys. He previously headed the led the research department of Troika Dialog, another Russian investment bank.

His departure comes months after Alfa Bank hired Edward Kaufman, the head of UBS’s Russian operation, to head its investment banking business, in a deal worth a reputed $10m a year.

The hiring market in Moscow has become fiercely competitive in the last 18 months and top analysts have been in demand.

In June, JP Morgan hired a team of analysts from Russian bank MDM Bank, while earlier in the year the heads of research at Deutsche Bank and UBS in the country quit.

UBS replaces Moscow-based research star

Financial News

Jason Corcoran in Moscow

15 August 2007

Swiss bank UBS has promoted one of its commodities analysts to replace star strategist Al Breach as head of research for Russia and CIS equities.

Alexei Morozov, previously a metal and mining analyst, takes over from Breach, a managing director in UBS's equity research division and one of the most highly rated analysts and strategists in Russia.

A UBS spokesman said: "Al Breach is staying on as head of strategy and economics until at least the end of 2007, which will enable the smooth transition of management responsibilities to Alexei."

Apart from an eight-month stint in Japan , Breach has been in Moscow since 1996. He was previously Goldman Sachs' economist for Russia and the former Soviet Union.

His claim to fame was to persuade Goldman Sachs to mark every stock in Russia a buy in 2000 while most investors were reeling from the fallout of the 1998 financial crisis.

Breach has recently become a director of Swedish investment company Vostok Nafta and is believed to be considering an offer to work in Asia.

Vladimir Postolovsky, co-head of UBS’s Russian equity research, also left in April to work at a hedge fund, two months after Ed Kaufman resigned as head of Russia to take up a post as chief executive of Alfa Bank's investment banking business.

Tuesday, 14 August 2007

Antanta to sell stake in Russian asset arm

Financial News

Jason Corcoran in Moscow
13 August 2007

Russian investment bank Antanta is lining up private equity buyers to take a 25% stake in its asset management business Pioglobal.

But Denis Matafonov, director for investments at Antanta Pioglobal, denied market speculation in Moscow that 100% of the company was being touted for sale with the UK's Standard Bank, the leading suitor. He said: “We need money, western experience and a western brand name for our asset management business and we are talking to a number of private equity firms with experience in this field.”

According to analysts, a 25% holding in Pioglobal Asset Management, which has about €500m ($685m) in assets under management, could be worth about $30m (€21.9m). It also has a 52% stake in a $150m real estate fund, which is not part of the sale. The company owns internet broker Net Trader as well as internet cafe chain Net City.

A Moscow private equity source suggested Troika, Alfa Capital or Baring Vostok could be interested. All three have recently raised significant funds to invest in Russia.

Pioglobal’s team runs six mutual funds and private portfolios, but it has struggled to gain scale in a competitive and fast-growing market, which is dominated by Troika, Renaissance Capital, Alfa and new foreign entrants such as Benelux bank Fortis and German insurer Allianz.

Saturday, 11 August 2007

Moscow driver attempts short cut

Moscow traffic frequently snarls to a standstill. Here one driver takes evasive action by trying to enter a perekhod. Unfortunately, the car doesn't quite fit.

Aer Rianta keen to mop up Moscow airport duty-free

The Irish Independent

By Jason Corcoran in Moscow

Thursday August 09 2007

THE overseas arm of Aer Rianta has confirmed it will compete with Russian state airline Aeroflot for control of a duty-free business in Moscow's main airport, Sheremetyevo.

Aer Rianta International, a subsidiary of Dublin Airport Authority, is a partner in a three-way business with Aeroflot and Sheremetyevo Airport Authority, which is selling up to concentrate on its core activities.

Eamon Foley, director general of Aer Rianta International, said the Irish operator is interested in bidding for Sheremeteyvo's stake outright or splitting it equally with Aeroflot.

Speaking in Moscow, Mr Ryan said: "We have a very comfortable relationship with our partners and we have built a very strong partnership with Aeroflot. Our joint venture is built on strong foundations and it benefits both parties.

"We bring an international dimension, and globally we have a huge buying power which our local partners do not have. There is no official sales process yet, so we are not clear how it will go."

A spokeswoman for Aeroflot said the airline was also interested in bidding, but much depended on the terms and the price. "It's too early to speculate on price and the negotiations which are just beginning," she said.

A former manager at Sheremetyevo suggested the 33.3pc stake could fetch $15m, while Aer Rianta is understood to think $12m is a fairer price.

The Aerofirst business consists of duty-free shops at Sheremetyevo-2 international terminal, as well as the Irish bar and the AeroShop onboard stores.

Sales at the location are close to $100m a year, although Sheremetyevo is facing intense competition for passengers from rival Moscow airports Domodedovo and Vnukovo.

Mr Foley declined to discuss the operation's profits, but said its principal asset is its concessions rights, which are due for renewal in a couple of years.

He hinted the Irish airport operator could also be interested in taking stakes in Russian airports, which are to be revamped under Russia's first major programme of public private partnerships (PPPs).

"We have experience as an equity investor in airports as well as airport management," explained Mr Foley.

"President Putin made investment in infrastructure such as airports a centrepiece of his recent State of the Union speech and we could yet be involved in that way."

Sunday, 5 August 2007

AC Milan's Gattuso tackled on Red Square

AC Milan's Rino Gattuso and a contingent of his AC Milan team mates popped out of the National hotel to take a constitutional in Red Square ahead of their appearance in the Russian Railways Cup.

Gattuso, know as the Snarler in Seria A for his attentive tackling style, was the picture of politness and patience despite being pestered for dozens of photograhs and autographs by mainly Italian tourists. Milan later losxt to PSV 3-4 on penalties with many of their leading strikers left out of the starting eleven.

Friday, 3 August 2007

Pioneer sets up shop in Moscow

Financial News

Jason Corcoran in Moscow
03 August 2007

Pioneer Investments, the funds arm of Italian bank UniCredit, is setting up an asset management operation in Moscow after failing to buy domestic player PioGlobal.

Pioneer, which has more than $326bn (€236bn) in assets, will launch four investment funds by September after being granted an asset management licence from the Federal Financial Markets Service, the Russian regulator.

The move to set up on its own follows Pioneer's failure to buy back PioGlobal Asset Management, which it established in 1995. Pioneer withdrew as a shareholder in PioGlobal following the former’s merger with Italy's UniCredit in 2000.

PioGlobal was subsequently acquired by US invsestors Harbor Global in 2000 before being sold to Russian bank CIT Finance last August for $71m. The business was sold this year to Russia's Antanta Capital for $80m so CIT could focus on its joint venture with Belgium's Fortis.

A banker close to the Harbor sale: "Pioneer made an offer to Harbor but it offered less than half than the eventual sale price."

Michael Vasileff, a business development director, is recruiting investment managers, having moved to Moscow to head Pioneer's Russian office.

One local fund executive suggested Vasileff would need to hire a minimum of 50 staff, including fund managers and back office personnel.

"They will need to spend heavily on marketing and public relations and it is much tougher to find good fund managers than bankers here. There are only four or five with any kind of record over the medium term," said the source.

A Pioneer spokesman declined to comment on its Russian plans.

UniCredit, Pioneer's Italian parent, is also making a push into retail and investment banking in Russia. Chief executive Alessandro Profumo said the group will double the number of branches belonging to its subsidiary International Moscow Bank to more than 100.

The eastern European arm of UniCredit last month completed the acquisition of Russian brokerage Aton Capital. It plans to offer underwriting and merger advice in addition to corporate lending.

Thursday, 2 August 2007

Goldman co-chief quits to join oligarch

Financial News

Jason Corcoran in Moscow

31 July 2007

A top banker from Goldman Sachs in Moscow has been recruited by a relatively unknown Russian billionaire to run his investment fund.

Magomed Galaev, co-head of Goldman Sachs in Russia, has been hired as president of Summa Capital, the investment vehicle of Ziyavudin Magomedov whose main businesses include oil transportation logistics, telecoms and metals.

One Moscow analyst, who declined to be named, claimed Galaev was lured by a remuneration package of $12m (€8.8m) a year. "Not even the generous Russian investment banks can compete with this money," he said.

Goldman was left rocking in March this year when Gordon McCulloch, then co-head of Russia with Galaev, left to join Russian bank Renaissance Capital.

According to sources, Galaev, who was hired from Morgan Stanley last year, shocked the bank by tendering his resignation on the same day.

Galaev had told friends he was going to work for one of his Russian clients. Goldman and Galaev's office denied he was leaving, fuelling speculation he might have been persuaded to stay to allow Goldman time to find a successor to McCulloch.

A source close to Goldman Sachs said Galaev would continue to work for the bank as an adviser although there was no details as to a new role.

Christopher M. Barter and David Schwimmer were appointed co-chief executives of Goldman's Russia and CIS business in June. Barter, who is believed to be moving to Moscow in August, will concentrate on securities and financing activities while Schwimmer will focus on investment banking.

Barter, who was previously co-head of the European financial institutions group, joined Goldman in 1993. Schwimmer, who helped orchestrate the New York Stock Exchange's merger with Archipelago, joined in 1998.

Goldman reopened for business in Moscow in January this year and has faced tough competition hiring talent. It has yet to make a big impression in the domestic capital markets' league tables.

In May, Goldman lost out to Russian bank MDM in a race to hire Oleg Vyugin, a former top regulator and respected banker.

Goldman Sachs declined to comment.

The bank, which employs over 100 staff in Moscow, is taking a measured approach to building its Russian business.

It opened its previous Moscow office in 1998 with a party attended by guests including George Bush senior, the former US president. Two months later, the Russian government defaulted on its debt and Goldman scaled back its presence.

In April, Goldman's group's chief executive, Lloyd Blankfein, wrote to President Vladimir Putin seeking a meeting in Moscow, according to the Kremlin. Blankfein wanted to discuss proposals to expand ties with the Russian state and companies, and talk about the economy.

It was announced last week that Magomedov's Summa Telecom, would spend $1bn out of the pockets of its main shareholder to build broadband wireless networks across the country.

The St. Petersburg-based company was founded in 2005 by Summa Capital. In November, Summa Telecom became the only company in the country to receive a nationwide WiMax licence.

Fortis strengthens Russian venture

Financial News

Jason Corcoran in Moscow

31 July 2007

Fortis Investments, the Belgo-Dutch asset manager, has doubled the number of staff in its Russian fund management joint venture to 90 and hired two senior investment professionals from a local rival.

The alliance with St Petersburg-based CIT Finance, completed in May, combines the companies’ interests in Russia and the Commonwealth of Independent States countries and Kazakhstan.

The venture has raided Russian rival Alfa Capital Partners for talent. Charles Tennes, former chief investment officer at Alfa, has been appointed head of equity, while Alfa portfolio manager Pavel Laberko arrives as head of research.

Tennes joined Alfa in 2003 from US hedge fund Rydex, where he oversaw $9bn (€6.6bn) in assets as portfolio director.

"Chuck Tennes is a leap forward for asset management in Russia," Alfa Capital chairman Bernard Sucher said, after hiring him.

Tennes is a commentator on financial media such as CNBC, CNNfn and Bloomberg TV.

Christian Fendt, director of the eastern Europe, Middle East and Africa regions at Fortis Investments, has moved to St Petersburg to become chief operating officer of the venture, which is headed by CIT’s Vladimir Tsuprov.

A spokeswoman for CIT Fortis said: "We have hired fund managers, middle and back office staff and we are looking for a head of sales and other sales people."

The joint venture, which has an office in Moscow, has launched a Kazakhstan subsidiary with six staff in Almaty, the Kazakh capital.

CIT Finance said assets under management had risen 44% to €910m since January.

Fortis said it wanted to tap into Russia's retail market and to offer international clients access to Russian investment opportunities.