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M&A tide remains high in Russia's financial sector in January

The financial sector made the largest contribution to Russia's M&A market in January 2014 owing to the banking market consolidation forces keeping the M&A activity high. The sector witnessed 7 transactions for a total of $550 million (30.7% of the market volume). The number of transactions exceeded the January 2013 result more than twice, their total amount soaring more than 20 times year-on-year, according to the recent issue of AK&M Information Agency's monthly bulletin MERGERS AND ACQUISITIONS MARKET (no. 193).

The largest deal of the month in the sector and in the whole M&A market was the purchase of the Bank of Cyprus's subsidiary in Ukraine by Alfa Group's entities, for the $307 million.

The construction and development sector made the second biggest contribution to the M&A market in January 2014 among the economy sectors (9 transactions for a total of $288.1 million, 16.1% of the total market volume). The highlight of the month was the acquisition by Tashir Group of the Aquadrome sports complex construction project in Moscow for $100 million.

The chemical and petrochemical industry stood third in January 2014, with 2 transactions for a total of $149 million (8.3% of the market volume), the largest of them being the acquisition of the Oka-polymer industrial park in Nizhny Novgorod region by Tosol-Sintez estimated at $99 million.

The transport sector ranked fourth with a slightly lower result of 2 transactions amounting to $140.6 million (7.8% of the total market volume). The largest deal was the purchase of rail carrier 3R by RailTransHolding estimated at $137.5 million.

The fuel and energy sector rounded out the top 5 in January 2014 witnessing a certain M&A fatigue after last year's boom. 2 transactions for a total of $118.7 million (6.6% of the total market volume) were finalized in the sector in January. The biggest contributor to the monthly result in the sector was the acquisition of the Koptevsky and Saratovsky gaseous sections in Saratov region by Independent Petroleum Company estimated at $65 million.

In several sectors, the M&A processes sped up in February after a lackluster start in January. In particular, an agreement to set up a joint venture comprising the mobile assets of Rostelecom and Tele2 Russia was signed in the telecom sector. The value of this transaction alone exceeds $2 billion. Also MegaFon effected two transactions: the parent company acquired SMARTS-Volgograd, while its subsidiary NetByNet took over the Tele MIG provider in Yamalo-Nenets autonomous area.

Nevertheless, the trend of investors moving from the real sector towards infrastructural assets (development, telecoms, finance) still persists, the only exceptions being the above-mentioned chemical industry and mechanical engineering (the latter contributing 5 transactions for a total of $67.2 million in January).

The waning interest in the industrial sectors is attributable to a discouraging January performance in the real economy: according to the Federal State Statistics Service, the industrial production index dropped by 0.2% again after a momentary growth late last year. The capital investment across the whole economy shrank still stronger by 7% year-on-year. With this in mind, the growing number and values of M&A transactions could be indicative of a bubble not backed by a real economic growth.

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"AK&M", 18.03.2014


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