Vienna Bourse Seeks ‘Friendly’ Merger With Warsaw Exchange

The Warsaw Stock Exchange (GPW) and the Vienna bourse will decide in the next few months on whether to start advanced merger negotiations after the Austrian operator proposed “friendly” consolidation.

The exchanges, which have fought for dominance in central Europe in past years, are discussing a merger that would create a hub for equities trading and initial share offerings, three people familiar with the talks said yesterday. Michael Buhl, chief executive officer of the Vienna bourse’s parent company will meet Warsaw’s new CEO, Adam Maciejewski, in coming days, Vienna exchange spokeswoman Beatrix Exinger said yesterday.

“The talks are at an early stage and non-binding,” Leszek Pawlowicz, chairman of the Warsaw exchange’s supervisory board, said in a phone interview today. “A decision on whether we should continue or halt the negotiations should be made in the next few months.”

Vienna expanded by buying the bourses in Ljubljana and Prague in 2008 and Budapest in 2004, creating CEE Stock Exchange Group holding and beating Warsaw’s bid for Prague. While Vienna and Prague had one initial public offering apiece since 2011, Warsaw attracted 41 as it lured companies by offering access to Poland’s cash-rich pension and mutual funds.

Various Scenarios

“A merger plan hasn’t yet crystalized and it will be up to investment banks to consider various scenarios,” Pawlowicz said. “We will need to check if there are synergies coming from such a merger and also whether this consolidation will benefit the Polish capital market and our economy.”

The combined domestic market capitalization of Vienna, Prague, Budapest and Ljubljana was 130 billion euros ($170 billion) at the end of January, according to the most recent data on the CEE Stock Exchange Group website, which is roughly equivalent to Warsaw’s 514 billion zloty at the end of March. Trading volume at the Vienna-led group amounted to 6 billion euros in January and February, compared with 8.9 billion euros in Warsaw.

Pawlowicz said it is too early to decide on whether Poland, which hold a controlling stake in the Warsaw bourse, should lose its “privileged shares” after the merger. The government considered selling a majority stake in the exchange to Deutsche Boerse (DB1) in 2009, then opted for an IPO in late 2010.

The Vienna bourse’s parent company is largely owned by Austrian banks and by companies listed on the Vienna bourse. A merger of Vienna and Warsaw “would make sense,” Herbert Stepic, CEO of Raiffeisen Bank International AG (RBI) told reporters today. The Austrian bank has 7 percent of the holding company.

“This would make a lot of sense, as well as further inclusions of smaller bourses,” Stepic said. “There’s enormous consolidation going on in the exchange business.”