VILNIUS - The competition for a controlling stake in the National Stock Exchange of Lithuania heated up on Feb. 11 when a Polish consortium announced its intention to participate in the public tender, pitting them against front runner OMHEX, which owns the national exchanges of Estonia, Latvia, Finland and Sweden.
The group of Polish investors, led by the Warsaw Stock Exchange and including the Polish Central Securities Depository and the Euronext group of stock exchanges, will submit a bid for the 54.47 percent share of the Vilnius bourse and a 32 percent stake in the Central Securities Depository of Lithuania.
OMHEX placed a bid early on in the privatization in an attempt to complete a triple crown of Baltic bourses.
"Lithuania is already very much a part of the Baltic-Nordic region, and if we look at the financial sector, we think that Baltic-Nordic is the only answer for the Lithuanian exchange," said Gert Tiivas, CEO of HEX Tallinn, Estonia's national stock exchange.
If successful in its bid, OMHEX hopes to roll out a unified trading platform for all of its exchanges by this autumn, meaning that Lithuanian securities could be traded according to the same standards used in other Baltic and Scandinavian capitals by the end of the year. OMHEX's prominence in the region has also afforded it experience with the Lithuanian securities market.
"We have been engaged in all sorts of cooperation projects that have given us a good introduction to Lithuania over the years," said Tiivas.
With OMHEX's regional supremacy looming above Lithuania's northern border, the Warsaw exchange's maneuver from the country's southern flank took many by surprise.
Crucially, the Polish consortium's greatest obstacle in the NSEL privatization process could be the fact that the Warsaw Stock Exchange is itself a state-held enterprise.
In the crucial eastern power grid (RST) privatization, Prime Minister Algirdas Brazauskas openly stated his aversion to handing over strategic national objects to companies controlled by foreign governments.
The Polish consortium remains unfazed by this potential stumbling block.
"I would consider this a problem if it were a terminal status for the Warsaw Stock Exchange, but in fact it is only a transitional status, as the Polish government plans on offering a public tender for us in the near future," said Wieslaw Rozlucki, president of the Warsaw Stock Exchange.
Rozlucki intends to fight fire with fire, touting the potential geographical benefits Poland could offer the Lithuanian financial sector over the Nordic option.
"The path from Lithuania to the center of Europe goes directly through Poland. Poland is well-positioned to attract the attention of foreign investors to Lithuanian securities," he said.
Tiivas disagreed. "Lithuania is essentially a part of the Nordic-Baltic market. There is comparatively little interest in Polish investments, so there is little logic in a Lithuania-Warsaw axis," he argued.
Regardless, given the fractured, inefficient nature of European exchanges, where economies of scale are extremely crucial for profitability, the only future for NSEL is to merge with a larger bourse.
The minimum bid for the combined assets of the NSEL and the CSDL has been set at 7.45 million litas (2.2 million euros).
The State Property Fund was unable to offer a majority stake in the CSDL when the Bank of Lithuania, which owns 60 percent of the depository's shares, refused to divest its holdings.