NYSE-Warsaw Bourse: The Secret Engagement

(WSJ.com) A confluence of events suggests that Poland’s Treasury Ministry is working toward making NYSE Euronext a strategic investor in the Warsaw Stock Exchange some day. NYSE is clearly courting the WSE and, for now, the WSE and its owner — the Polish state — are enjoying it.

In mid-June, Polish Treasury Minister Aleksander Grad told Dow Jones Newswires that the Warsaw Stock Exchange was in talks with a strategic partner that could in future, after the company’s initial pubic offering in November, buy a minority stake in the business.

“If the strategic partnership works, it can’t be ruled out that the Treasury will sell its minority stake in Warsaw Stock Exchange to that entity,” Mr. Grad said at the time.

Reuters

Polish Treasury Minister Aleksander Grad at the Warsaw Stock Exchange.

Less than a month later, NYSE Euronext and the Warsaw Stock Exchange announced they had a strategic, long-term cooperation partnership that involves the Polish bourse’s cash and derivative markets migrating to a universal trading platform supplied by NYSE Technologies.

This Friday, NYSE Chief Executive Duncan Niederauer was in Warsaw for a working visit with WSE Chief Ludwik Sobolewski. The former declined to say whether NYSE would take a stake in the Warsaw Stock Exchange’s IPO, saying: “Let’s leave that for another time, giving the timing.”

But the presence of journalists from across the region, including from Bulgaria, Romania, Ukraine and Austria, suggests both exchanges share and want to communicate the vision of making Warsaw a regional financial hub — a one stop show for the asset called “Central Europe.”

The Warsaw Stock Exchange’s strategy fits with the Treasury Ministry’s wider strategy of making the city of Warsaw into a financial capital that counts. Even as its parcels out privatization advising deals to the world’s top investment banks, it’s keeping the pressure on, checking whether they are keeping their individual promises to have a real, physical presence in Poland’s capital. Investment bankers in Warsaw don’t like to go into details on the record about their office leasing situations or staffing levels at the moment.

A BROKEN ENGAGEMENT

This isn’t the WSE’s first time at the ball. It has danced with others before. Late last year, the Treasury failed to sell a majority stake in the exchange to Deutsche Boerse AG, the only bidder left after the London Stock Exchange, Nasdaq and NYSE walked away. The Treasury set some tough conditions, which the German company found impossible to meet.

A person familiar with the situation told Dow Jones Newswires the Treasury wanted Deutsche Boerse to guarantee the total market capitalization of the Warsaw market would not fall below a certain number. But stock prices fall. Bourse operators have no control over that.

Now Poland plans to offer around 63% of shares in the Warsaw Stock Exchange and plans to hold on to 25% to 30% in the business after the IPO. It now has more experience with privatization negotiations, which means the likelihood the WSE will have a strategic investor someday is rising.