Jan Cienski in Warsaw -
Just a few months ago, Aleksander Grad, Poland's treasury minister, was saying that selling off the Warsaw Stock Exchange was a key part of his ambitious privatisation programme, but the collapse of that effort in the final weeks of last year has the minister scrambling for another way to change the WSE's ownership structure.
The original plan called for a majority stake in the bourse, which is 99% owned by the state, to be sold to a strategic investor - ie. a large foreign stock exchange that would provide the technology and links to a larger market as a way of ensuring Warsaw's continued viability. A secondary goal was to earn as much as possible from the sale, part of a wider programme aimed at raising enough revenues to stop Poland's public debt from spiralling to dangerous levels due to the after-effects of the global slowdown.
But the response to the offering was lacklustre. Initially, the London Stock Exchange, Nasdaq OMX, NYSE Euronext and Deutsche Boerse all responded to the government's invitation, but London withdrew before the process was concluded and in the end only the Frankfurt exchange submitted a bid.
The idea of selling the institution that had become the symbol of Poland's transition to a market economy was always controversial, and became more so when only a single bid was filed. "We support the idea of the privatisation of the WSE, but we have reservations over the chosen model," said Maria Dobrowolska, head of Poland's Chamber of Brokerage Houses.
The Treasury then sent the Germans a host of demands to ensure that, despite the ownership change, Warsaw would remain the centre of decision-making for the WSE, and that the Deutsche Boerse would not poach the Polish exchange's best listings. Further dismayed with what is thought to have been a very ambitious price target, the Germans backed out of the bid. "Most likely what happened was that the exchanges invited to take part in the bidding did not want to accept the minister's conditions regarding retaining the WSE's autonomy, which was a priority issue," says Jacek Socha, a former treasury minister who is now a partner with PricewaterhouseCoopers, the consultancy. "In that situation, further talks made no sense."
Polish governments have long looked at the economic activity and wealth generated by financial centres like London and Hong Kong, and hoped to replicate - albeit on a much smaller scale - a similar financial hub, with the jobs and skills it would create, in Warsaw.
The new privatisation plan, to be fleshed out by Grad over the coming weeks, is thought to rely on selling the WSE through an IPO on the exchange by about the fourth quarter of this year, with the goal of ensuring that no buyer ends up with a controlling stake. The ministry will probably carve up the shares between local brokerages, institutional investors and investment funds. "An airplane called the WSE will be landing on the airport which is the Warsaw bourse," Ludwik Sobolewski, the exchange's president, told reporters.
What is very unlikely to happen is for Warsaw to allow the Vienna exchange to place a bid. In a recent interview, Sobolewski sniffed that it was a little unusual for a smaller exchange to think of buying a larger one. Warsaw last year decisively passed Vienna, and is now Central Europe's largest exchange.
Although Austria is a much smaller place than Poland, Austria has taken advantage of the head start of not having lived under communism to quickly buy up exchanges across much of Central and Southeast Europe. Warsaw had similar ambitions, but was hampered by being owned by the government, an anomaly in Europe today and something that persuaded exchanges like those in Prague and Vilnius to reject Polish bids.
Although it has few foreign links, Sobolewski's vision is to turn the WSE into the region's premier exchange by persuading ambitious companies to launch in Warsaw, instead of dealing with the higher costs and barriers of listing in London. Sobolewski has spent an enormous amount of time and effort on Ukraine, but that country's economic collapse has put paid to ambitions of getting a host of Ukrainian IPOs onto the exchange.
However, if Warsaw continues to serve as an independent regional financial hub, it may be an attractive venue once the rest of Central Europe emerges from the global recession.
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