Bourse on course
Swedish-based OMX group, which runs the bourses in Stockholm, Helsinki, Estonia, Latvia and Lithuania, might consider buying the Warsaw Stock Exchange (WSE), as the press has so anxiously reported in the last week. At this early stage, however, the array of possibilities for the WSE, Central and Eastern Europe’s largest exchange, go far beyond that nugget of speculation.
For one thing, any takeover or joint venture with another European exchange will have to wait for the WSE's privatization next year. For another, OMX (previously named Ohmex) is but one of four main European players that could get in on the game. The one sure thing, however, is that once the WSE is finally freed from the constraints of state ownership, some sort of consolidation with other major European players is pretty much inevitable. The only question is—with whom?
Leaving the state behind
Fortunately, the government appears to be fully behind the developments. And Deputy Finance Minister Igor Chalupec's latest statements are particularly telling: Last week he said that one electronic market for large issuers would be sufficient for the entire EU, in addition to regional bourses—which would list primarily SME (small- to medium-sized enterprise) stocks. The WSE could play this latter role of regional market, Chalupec explained, while some other nations would have to consider whether they even need their own bourses at all.
"There is no reason to prolong the situation in Poland," said Wieslaw Rozucki, president of the WSE, last month, of the need for privatization. "Today, the integrated stock exchanges compete among one another, and in such a condition of competition, a state-owned exchange [like the WSE] has fewer chances of survival than a publicly-traded company."
And that is why, on September 20, the Treasury Ministry is to announce the new advisor who will in large part determine the future of the WSE. This new advisor will, most importantly, choose the best method for privatization—either by public offering, or through the sale to a strategic investor, or by a combination of the two. If applicable, the advisor will also choose from among the potential strategic investors.
The players...
When the privatization finally happens, it's a safe bet that the WSE will fall in with one of Europe’s other major players. The most likely candidates are the following four: OMX, the London Stock Exchange, the Deutsche Börse in Frankfurt, and a company called Euronext, which controls the exchanges in Paris, Brussels and Amsterdam. A fifth option would be to merge with the Budapest and Vienna exchanges to create a Central European regional exchange, a scenario that could very likely also involve one of the aforementioned top European players.
Many experts would agree that this fifth option—a regional exchange—is the way to go, including none other than Jukka Ruuska, deputy president of the OMX group, the same man quoted in the press last week as saying that his company is interested in acquiring the Warsaw Stock Exchange.
Player number one...
"We have been in touch with various stakeholders in the Warsaw Stock Exchange," says Ruuska, whose Stockholm-based firm is rapidly moving toward a Nordic/Baltic integrated market, especially now that it purchased the Lithuanian bourse last spring.
Indeed, OMX may be the one to watch. The firm has a history of bold moves. Back in 2000, the company—then called OM group—made a hostile bid for the London Stock Exchange (LSE), the first such bid for a major stock exchange in world history. That gamble didn't pay off, however.
What might surprise those who read last week's rumors in the press is that Ruuska does not envision Warsaw as being part of OMX's Nordic/Baltic group, but rather as a hub for Central and Eastern Europe, which then begs the question of what exactly OMX's role would be in such a scenario. Ruuska responds by describing the "regional market concept" that his company is in the process of developing:
"With a regional market, you can combine the benefits of size, economies of scale, and an excellent level of information [flow]." He also says that a regional market has the benefit of a strong investor base that is often most comfortable working within one geographic region. OMX is apparently putting this theory into action, armed with their latest in trading technology.
Of the Nordic/Baltic integrated market that OMX is currently working toward, Ruuska says, "in terms of this alliance we have accomplished, it is creating significant benefits." And it is exactly this type of integrated system that OMX might try to sell to the WSE, most likely as part of a CEE market combining Warsaw with Budapest and Vienna, two exchanges that, although smaller than Warsaw's, could combine forces to dominate the region.
Whether OMX would just sell their 'regional market' technology or actually choose to swallow up the WSE completely is up for speculation, although many would expect the latter.
Players two, three, four...
With the regional market theme, another natural choice for partnership would be the Deutsche Börse in Frankfurt. After all, the German exchange, much like all the other players, has had its own share of consolidation fever in the past. Back in the spring of 2000, the Deutsche Börse and the London Stock exchange announced a merger that was to form a new exchange called iX. This included a planned joint venture with America's Nasdaq for a high-tech market. But following the hostile bid on London by OM group, the ambitious iX plans disintegrated and the LSE and Deutsche Börse have kept to themselves ever since.
Interestingly, one result of the iX merger announcement was that Paris quickly responded by signing with Brussels and Amsterdam into a group called Euronext. And that knee-jerk reaction ended up creating what is today Europe's leading cross-border exchange. Funny how that works.
Slowly but surely
The management of the Warsaw Stock Exchange are not shy to admit that they are in contact with most of the main players, Euronext included. But since the WSE is still state-owned and answering to the Treasury Ministry, for now it's all mostly talk and little action.
"Any decision would be made by the future advisor," says Piotr Szeliga, vice president of the WSE.
"As the management of the WSE, we are in a very delicate role, because we are not a private company; many things should be discussed with the Treasury."
And indeed all of the nervous anticipation will have to wait until next year. As Szeliga says: "This is absolutely the first period of a long process."
But, cautiousness aside, there can be no doubt that next year is set to bring some very interesting developments indeed.
For one thing, any takeover or joint venture with another European exchange will have to wait for the WSE's privatization next year. For another, OMX (previously named Ohmex) is but one of four main European players that could get in on the game. The one sure thing, however, is that once the WSE is finally freed from the constraints of state ownership, some sort of consolidation with other major European players is pretty much inevitable. The only question is—with whom?
Leaving the state behind
Fortunately, the government appears to be fully behind the developments. And Deputy Finance Minister Igor Chalupec's latest statements are particularly telling: Last week he said that one electronic market for large issuers would be sufficient for the entire EU, in addition to regional bourses—which would list primarily SME (small- to medium-sized enterprise) stocks. The WSE could play this latter role of regional market, Chalupec explained, while some other nations would have to consider whether they even need their own bourses at all.
"There is no reason to prolong the situation in Poland," said Wieslaw Rozucki, president of the WSE, last month, of the need for privatization. "Today, the integrated stock exchanges compete among one another, and in such a condition of competition, a state-owned exchange [like the WSE] has fewer chances of survival than a publicly-traded company."
And that is why, on September 20, the Treasury Ministry is to announce the new advisor who will in large part determine the future of the WSE. This new advisor will, most importantly, choose the best method for privatization—either by public offering, or through the sale to a strategic investor, or by a combination of the two. If applicable, the advisor will also choose from among the potential strategic investors.
The players...
When the privatization finally happens, it's a safe bet that the WSE will fall in with one of Europe’s other major players. The most likely candidates are the following four: OMX, the London Stock Exchange, the Deutsche Börse in Frankfurt, and a company called Euronext, which controls the exchanges in Paris, Brussels and Amsterdam. A fifth option would be to merge with the Budapest and Vienna exchanges to create a Central European regional exchange, a scenario that could very likely also involve one of the aforementioned top European players.
Many experts would agree that this fifth option—a regional exchange—is the way to go, including none other than Jukka Ruuska, deputy president of the OMX group, the same man quoted in the press last week as saying that his company is interested in acquiring the Warsaw Stock Exchange.
Player number one...
"We have been in touch with various stakeholders in the Warsaw Stock Exchange," says Ruuska, whose Stockholm-based firm is rapidly moving toward a Nordic/Baltic integrated market, especially now that it purchased the Lithuanian bourse last spring.
Indeed, OMX may be the one to watch. The firm has a history of bold moves. Back in 2000, the company—then called OM group—made a hostile bid for the London Stock Exchange (LSE), the first such bid for a major stock exchange in world history. That gamble didn't pay off, however.
What might surprise those who read last week's rumors in the press is that Ruuska does not envision Warsaw as being part of OMX's Nordic/Baltic group, but rather as a hub for Central and Eastern Europe, which then begs the question of what exactly OMX's role would be in such a scenario. Ruuska responds by describing the "regional market concept" that his company is in the process of developing:
"With a regional market, you can combine the benefits of size, economies of scale, and an excellent level of information [flow]." He also says that a regional market has the benefit of a strong investor base that is often most comfortable working within one geographic region. OMX is apparently putting this theory into action, armed with their latest in trading technology.
Of the Nordic/Baltic integrated market that OMX is currently working toward, Ruuska says, "in terms of this alliance we have accomplished, it is creating significant benefits." And it is exactly this type of integrated system that OMX might try to sell to the WSE, most likely as part of a CEE market combining Warsaw with Budapest and Vienna, two exchanges that, although smaller than Warsaw's, could combine forces to dominate the region.
Whether OMX would just sell their 'regional market' technology or actually choose to swallow up the WSE completely is up for speculation, although many would expect the latter.
Players two, three, four...
With the regional market theme, another natural choice for partnership would be the Deutsche Börse in Frankfurt. After all, the German exchange, much like all the other players, has had its own share of consolidation fever in the past. Back in the spring of 2000, the Deutsche Börse and the London Stock exchange announced a merger that was to form a new exchange called iX. This included a planned joint venture with America's Nasdaq for a high-tech market. But following the hostile bid on London by OM group, the ambitious iX plans disintegrated and the LSE and Deutsche Börse have kept to themselves ever since.
Interestingly, one result of the iX merger announcement was that Paris quickly responded by signing with Brussels and Amsterdam into a group called Euronext. And that knee-jerk reaction ended up creating what is today Europe's leading cross-border exchange. Funny how that works.
Slowly but surely
The management of the Warsaw Stock Exchange are not shy to admit that they are in contact with most of the main players, Euronext included. But since the WSE is still state-owned and answering to the Treasury Ministry, for now it's all mostly talk and little action.
"Any decision would be made by the future advisor," says Piotr Szeliga, vice president of the WSE.
"As the management of the WSE, we are in a very delicate role, because we are not a private company; many things should be discussed with the Treasury."
And indeed all of the nervous anticipation will have to wait until next year. As Szeliga says: "This is absolutely the first period of a long process."
But, cautiousness aside, there can be no doubt that next year is set to bring some very interesting developments indeed.
