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. Last Updated: 07/27/2016

Flemings to Acquire UCB Majority Stake




British investment bank Robert Fleming & Co. announced Wednesday it will buy a controlling stake in one of Moscow's leading brokerages United City Bank, reflecting growing consolidation in Russia's investment banking industry.


"The franchise which UCB has created in 2 1/2 years of operations ... can be leveraged many times over through integration into a major international investment bank with one of the best franchises in global emerging markets," said Christopher Granville, head of research at UCB.


Flemings said in a statement that the deal would be finalized in the coming weeks after regulatory approval and an audit of UCB's operations.


Both sides declined to provide details of the deal, but banking sources said Flemings would buy a 60 percent stake at a price that values UCB at between $30 million and $50 million. UCB staff and management are expected to retain a 40 percent stake in the company.


UCB, founded two years ago, is one of Russia's top 10 brokerage houses, employing around 100 people in Moscow. The move to sell a controlling stake to Flemings comes as major international investment banks are eyeing independent brokerage houses in Moscow to expand their presence in Russia. Last summer, SBC Warburg announced an agreement to form a joint venture with the Moscow brokerage Brunswick.


UCB chose Flemings over other suitors, including the French bank Paribas and an unspecified German bank, according to a banker who asked not to be named.


The company, to be named Flemings UCB, will incorporate Flemings' existing operations in Russia, which include nearly 30 employees. Flemings last year joined with the Russian bank Guta to market domestic mutual funds in Russia.


A spokesman for Flemings said the deal, which comes after months of emerging-market turmoil, was a sign of the bank's confidence that the Russian market represents a good long-term bet. "We think Russia's long-term potential is very significant," spokesman Shane O'Riordain said.


He said he did not expect any layoffs once the deal is finalized. Flemings has a large East European operation with about $1 billion under management in the region. It has been aggressively expanding into other emerging markets in recent years, including South Africa, Brazil and Egypt, by buying into local brokerage houses.


UCB was put up for sale last year by its London-based parent company MC-BBL after Banque Bruxelles Lambert, which holds 51 percent of MC-BBL, was acquired by ING Barings. The takeover raised concerns as ING Barings already had a large brokerage operation in Moscow.