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. Last Updated: 07/27/2016

Rinaco Plus Gets Deal To Merge With Nikoil

Rinaco Plus, a brokerage that had a turnover of over $1 billion in the first half of 1998, has made a second deal in as many months to be absorbed by a stronger company.

Rinaco announced Thursday that it had reached a merger agreement with Nikoil, the banking and investment subsidiary of Russia's biggest oil company, LUKoil, just days after a previously announced merger with the investment company Aton fell apart.

Most other brokerages and investment companies that have survived the severe financial crisis that killed the government securities market and all but wiped out equity trading are trying to go it alone. So Rinaco's frantic search for a partner has drawn a lot of attention.

Viktor Agroskin, Rinaco's managing director, said Friday that both his company and Aton had called for the divorce because major differences had become apparent in their views on the future of the Russian capital markets. But insiders and analysts say the Aton deal, announced in September, soured because of Rinaco's financial problems, which Aton did not want to share.

"During the crisis you had to move fast, there was no time for in-depth analysis," Aton President Yevgeny Yuryev said. "After we conducted some analysis, we stopped the deal."

A source familiar with the Aton-Rinaco negotiations said Aton had broken off the merger after finding out from Rinaco clients that the firm had not fully disclosed the amount of its debts.

Analysts explained Rinaco's troubles by the company's considerable exposure to the Russian treasury bill market and the firm's inability to reduce its 150-strong staff quickly when the financial crisis broke out.

"They had a leading position and could compete with foreign companies [before the crisis], but they didn't have a cushion that would protect them when it hit," one trader said.

Rinaco led in turnover in the Russian Trading System, or RTS, between fall 1997 and last August. But, Agroskin admitted, the firm has done almost no business for the past two months.

Rinaco's marriage with Nikoil looks happier than the one with Aton. In fact, according to one source, Nikoil, an empire with assets of $800 million and $500 million in capital, simply offered Rinaco a better deal for its highly qualified staff and remaining clientele.

An analyst with a major Western bank said Nikoil, which incorporates a number of businesses, including a bank, an oil investment company and several investment funds, needed an infusion of new blood to its equity department since a few of its most prized traders, all expatriates, walked out a few weeks ago.

Under the deal, former Rinaco brokers would form an equity department within Nikoil's oil investment company. The department would later become a separate company within the empire, Nikoil spokesman Sergei Vetchinin said.

Agroskin said he was confident Rinaco as part of Nikoil would recapture its share of the equity market, which he claimed reached 20 percent in more prosperous times.