Sale of Kazakh bank BTA to Halyk falls through

By bne IntelliNews November 19, 2013

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An attempt by the Kazakh government to sell BTA Bank to Halyk Bank has fallen through. With no other suitors for the troubled bank in sight, the state says it will now look for strategic investors.

Talks ended "by mutual consent" after Kazakhstan's sovereign wealth fund Samruk-Kazyna, which owns BTA rejected Halyk's bid, says a November 18 statement published on Halyk's website.

"Following completion of the due diligence, Halyk Bank provided to Samruk-Kazyna certain indicative, non-binding terms of the potential acquisition of interest in BTA Bank, which were not accepted by Samruk-Kazyna," it read. "Therefore, negotiations ... have been discontinued by mutual consent of the parties, and Halyk Bank is no longer considering this transaction."

In February, Kazakhstan's then Deputy Prime Minister Kairat Kelimbetov (now the new central bank governor) had proposed exchanging BTA for Halyk's pension fund, which will be taken over by the National Bank of Kazakhstan as part of Astana's pension reform programme. The chair of Halyk's management board Umyt Shayakhmetova confirmed on May 29 that the bank was carrying out due diligence on BTA and had entered negotiations on a possible acquisition.

However, Halyk is understood to have wanted to separate the two deals. In June, the chairman of Halyk's board of directors Alexander Pavlov said that the pension fund had been valued at $576-$715m, and that the sale of the fund should be done on a cash basis rather than a swap for BTA.

Visor Capital writes in an analyst note ditching the deal is likely to improve Halyk's position with investors. "Overall, we believe this announcement on termination of the BTA negotiation will bring relief to the investment community, as it brings less uncertainty for the bank. As such, we expect a positive rating action from Fitch in the near term."

BTA was nationalised in February 2009, as it was in danger of collapse due to a combination of fraud and over-exposure to Kazakhstan's real estate market. The bank initially agreed a restructuring deal with creditors in September of the same year, and pushed it through in May 2010. However, its financial position deteriorated again in 2011, and a second debt restructuring deal was agreed in October 2012.

That crunch in the banking sector also left Samruk-Kazyna as the majority shareholder in BTA subsidiary TemirBank, as well as Alliance Bank. It also holds a minority stake in Kazkommertsbank. Early in 2013, President Nursultan Nazarbayev told government officials to find buyers, and that the state should exit its holdings in commercial banks by the end of the year.

Samruk-Kazyna said in a November 19 statement that it "continues to look for strategic investors for the sale of its stake in BTA Bank." The fund is hoping to offload other bank assets in the near future. On October 10, it confirmed that it is in negotiations with Verniy Capital owner Bulat Utemuratov over the sale of shares in Temirbank and Alliance Bank.

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