Paribas, Russky Standart Trade Blame for Divorce

VedomostiRustam Tariko
BNP Paribas and Russky Standart banks traded the blame Thursday for the collapse of a takeover deal, which analysts said highlights the risk of buying into Russia's poorly regulated and undercapitalized financial sector.

France's BNP Paribas said late Wednesday its Cetelem consumer credit unit had walked away from a deal to buy 50 percent of the company that controls Russky Standart, a leader of the booming Russian micro consumer credit market.

The value of the failed deal was never officially revealed, but banking sources put it at $300 million. Analysts believe the deal fell apart because Rustam Tariko, the owner of Russky Standart, wanted to hike the sale price.

The deal had hit trouble in December, when a source said the Russian bank had not made the necessary filings to local banking authorities, leading BNP to file suit at a London commercial court.

Russky Standart shot back that talks on a negotiated settlement had been derailed by Paribas' suit.

"BNP Paribas made steps to enforce the deal, making it impossible to settle the argument between the parties," Russky Standart said in a statement.

BNP Paribas was not immediately available on Thursday for further comment, but on Wednesday it said the end to the acquisition "is due to Mr. Tariko and his group failing to comply with their commitments."

BNP Paribas said it would continue to develop on a standalone basis in Russia, which is one of its priority areas.

While Eastern European countries like Poland have largely sold out their banks to foreign players, which have invested and restructured local operations, Russia has over 1,200 banks, and dominant players like Sberbank are still state-owned.

Confidence in the financial sector was shaken by a run on secondary banks last year when the central bank got poor marks for its crisis management.

A scheme of deposit insurance now being implemented has so far failed to address the fundamental weakness of the financial sector, which is its fragmentation.

Nevertheless, international players are circling Russia's retail banks, with Italy's Mediobanca named as a possible buyer of a stake in No.2 bank Vneshtorgbank and GE Consumer Finance acquiring Deltabank for $150 million.

A European bank analyst in London said the deal's failure highlights acquisition risks in emerging markets, but he credited BNP Paribas with walking away before any irreversible damage.

Renaissance Capital said in a note to clients that Russky Standart's consumer lending business was of interest to at least two other global players looking at the Russian market.

"Russky Standart's main shareholder may have picked up indications of other potential bidders," it said.