Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
James Bond needed a motorbike, an aeroplane and a parachute to escape from Russia in the film Goldeneye. Austria’s Raiffeisen Bank has served up an equally elaborate scheme that may extricate it from the same country.
To succeed, the executives behind a complicated deal with oligarch Oleg Deripaska will need connections, flair and luck of the kind deployed by MI6’s most famous spy. Hope sent heavily-discounted Raiffeisen shares up a tenth on Wednesday.
The deal is apparently intended to solve two problems. First, to reduce Raiffeisen’s Russian exposures. Second, to remove a sanctioned person from the ownership of Strabag, Austria’s largest construction group.
Raiffeisen’s Russian banking operation is highly profitable partly because it is one of the few remaining financial links to the west. Currency controls to prop up the rouble keep dividends in the country. A transfer of shares represents an alternative means of taking value out.
Raiffeisen’s Russian bank was sitting on almost €4bn worth of shareholder equity as of the third quarter of this year. The proposed deal would shift €1.5bn worth of that in roubles to Rasperia, a company that holds 28.5mn Strabag shares.
Up until Wednesday, Deripaska owned a stake in Rasperia. Ahead of the deal, that ownership switched to unsanctioned individuals. This is evidently supposed to allow an exchange of value that does not breach EU sanctions.
Raiffeisen will have to prove to enforcers that the two transactions are financially independent. If that succeeds, Raiffeisen will distribute a stake in Strabag it has received as a dividend in kind to the bank’s Austrian top holding company. Russian approval would be needed for that.
Lex calculations suggest Raiffeisen is, in effect, paying a 37 per cent premium to Strabag’s undisturbed price for the shares.
The deal would however allow Raiffeisen shareholders to realise some value from the lucrative Russian business. Continued ownership of the unit has made a previously low-profile Austrian bank a symbol of western accommodation with Putin’s Russia.
Sanctions watchdogs should subject this surprising transaction to appropriately searching scrutiny.
Read the full article here