russian m&a market outlook 2013 alexander nadmitov helsinki, 27/08/2013
TRANSCRIPT
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Russian M&A Market Outlook 2013
Alexander NadmitovHelsinki, 27/08/2013
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Main Trends in 1H 2013
• Twofold decrease in M&A activity: US$13,4 bln. against US$27 bln. in 1H 2012
• Most investors – from Russia, less international buyers (85% buyers – Russian companies)
• Foreign investors active in oil&gaz/real estate:– BP buys 5,66% in Rosneft for US$4,87 bln. as part
of TNK-BP deal – Morgan Stanley Real Estate buys Metropolis retail
mall in Moscow for US$1,2 bln.
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Dominance of state-owned corporations
• Acquisitions by state-owned companies on rise (hidden nationalization) – US$54 bln. purchase for 96,51% of TNK-BP (oil) by
Rosneft, 03/2013 – US$2,9 bln. for 49% in 100% consolidation of Itera
(gaz) by Rosneft, 06/2013– US$2,3 bln. purchase of Russian assets of Tele2 by
VTB (2013, telecom);• Expansion of Russian state corporations abroad:
purchase of DenizBank by Sberbank;
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International expansion
• Russian companies going global (recent example: acquisition of stake in Jokerit hockey team and Hartwall Areena in June 2013)
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Divestures
• Metals and mining companies are divesting of loss-making foreign subsidiaries – restructuring their businesses (Mechel sold a number of assets in USA, Romania, Bulgaria, Ukraine, Kazakhstan)
• Russian companies become mature like other international players
• IT/Internet business gradually replacing traditional industrial sector
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Rise of IT / Internet sector
• In 2011 Russian Internet market became the largest in Europe and online trade shows two-digit growth every year
• Rise of venture and private equity deals in Internet/IT sector: (US$700 mio. purchase of 48% in Vk.com, popular Russian social network, valuing it at US$ 1,5 bln.)
• IT companies going public:– Qiwi IPO on NASDAQ, 05/2013 at valuation of US$884 mio.– Luxoft IPO on NASDAQ, 06/2013 at valuation of US$550 mio.
.
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Venture Investments: 2012
• 201 reported deals of US$910mio. in total– US$792 mio. invested in IT startups– US$108,4 mio. (18) in industrial technologies– US$10,2 mio. (15) in biotechnologies– 12 exits for US$372 mio.– 3 deals above US$100 mio. (2 cleantech: JV on energy-saving
glass, polysilicon manufacturing, microchips)• More competition among startups, more specialization
among funds, funds invest more in startups who survived early stages of development, lack of angel investors
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State Development Agencies and Investment Funds
• Skolkovo Fund (gives grants) in 2012:– Industrial technologies –US$75,8 mio.– IT – US$26,5 mio.– Biotech – US$16,7 mio.
• Rusnano (prefer investments over US$100 mio., particularly in nanotechnologies)
• Russian Venture Corporation (state fund of funds)• Russian Direct Investment Fund• Vnesheconombank (VEB)
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• Most of transactions under English law• through offshore SPV/ holding companies – mostly
Cyprus (following Cyprus crisis – switch to other jurisdictions)
• Russian law issues to consider: – antimonopoly filings– investments into strategic companies– notary certification for transfers of participation shares
in limited liability companies– mandatory offers for open joint stock companies
Legal aspects
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Antimonopoly requirements
• Thresholds for RF FAS clearance:– by total value of assets – 7 bln. rubles (EUR 162 mio.)
or by total revenue – 10 bln. rubles (EUR 233 mio.)– total value of assets of target’s group – 250 mio.rubles
(EUR 5,8 mio.)• Acquisition of:
• more than 25%, 50% or 75% shares in Russian joint stock company, or
• 1/3, 1/2, 2/3 participation shares in Russian limited liability companies
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Investments into Strategic Companies
• Acquisition of control over a strategic company by a foreign company requires preliminary clearance by the Russian government
• Acquisition: • more than 50% of the voting shares of a strategic company;• more than 25% of the voting shares of a strategic company
owning a subsoil plot of the federal importance.• Other transactions aimed at the transfer to a foreign
investor a right to determine decisions of the management of a strategic company.
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Strategic types of activity
geological studies and (or) exploration and mining operations on subsoil plots of federal significance;
extraction (catch) of aquatic biological resources;
activities related to production, development, distribution, etc. of aviation equipment and arms;work on modification of hydro meteorological or geophysical processes and phenomena;
activities related to use of infectious diseases;
activities related to nuclear energy and materials;
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development, production, distribution, maintenance (except banks) of encryption (cryptographic) means;
identification, development, production, sale of electronic devices intended for secret information;
implementation of the television and radio broadcasting;
activity of a natural monopoly entity;
provision of communication services by entity with dominant position at the market;
printing activities or activities of the editors and (or) publisher of the periodical publication.
Strategic types of activity
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Statistics for 5 years
satisfied 156
satisfied with imposition of conditions
38
refused to satisfy
9
returned as approval was not required
106
recalled by applicants
35in process of consideration
5
None of the FAS Russia decisions was appealed to court.
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Recent experience
• Acquisition of US$100 mio. minority stake in Russian bank, June 2013
• Acquisition of 40% in microfinanicng organization, June 2013
• Sale of startup company in electronic payments to two venture funds, December 2012
• Sale of sea port under construction for US$100 mio., November 2012
• 35 antimonopoly filings in 1H 2013
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Our contact details
Alexander NadmitovManaging Partner
Nadmitov, Ivanov and Partners Law Firm LLCAddress: Office 1302, Entrance 6, 12
Krasnopresnenskaya Nab., Moscow, 123610, Russia, Phone: +7 (495) 649-87-12
Fax: +7 (495) 649-87-21Email: [email protected]
Website: www.nplaw.ru