Warsaw Stock Exchange Plans to Acquire Armenian Stock Exchange: Central Bank

On September 18, 2020, the management board of the Warsaw Stock Exchange (WSE) and the Central Bank of the Republic of Armenia (CBRA) signed a memorandum of understanding regarding negotiations for WSE to acquire a 65% controlling stake in the Armenian Stock Exchange. The agreement is non-binding. The final terms of the acquisition will depend on the completion of necessary studies and the outcomes of corresponding corporate approvals, according to a statement from the press service of the CBRA.

“The established relationship between the WSE and the Central Bank of Armenia is good news for both parties. There is a need for Quality investments in many sectors of the Armenian economy, so the country has enormous growth potential. Investments drive economic growth, especially in emerging markets. I believe that the acquisition of the Armenian Stock Exchange by the WSE will contribute to the rapid growth of Armenia's capital market, and the Warsaw Stock Exchange will be able to provide satisfactory returns on investment. It is also important that Poland is contributing to the establishment of emerging markets, which is a positive direction,” said Jacek Sasin, Deputy Prime Minister and Minister of State Assets of Poland.

The memorandum signed between WSE and CBRA sets the framework for further negotiations aimed at concluding a potential investment agreement. As a next step, WSE will conduct a comprehensive study, develop a five-year development plan for the Armenian Stock Exchange in collaboration with CBRA and the Armenian Stock Exchange, and establish the final terms of the investment agreement, which may differ from the framework conditions.

“The WSE is a stable and steadily growing company at the heart of Poland's capital market and a leader in the stock exchange industry in Central and Eastern Europe. I am confident that the extensive experience and knowledge gained over the past 30 years by the Warsaw Stock Exchange will contribute to developing close and productive relations with Armenia's financial market,” noted Dominik Kaczmarski, head of the Department of Analyses and Reporting of the Polish Ministry of State Assets and chair of the supervisory board of WSE.

WSE has established a list of over ten potential strategic projects aimed at the long-term development of the Armenian Stock Exchange for its analyses preceding the memorandum's implementation. The main areas of development include implementing cutting-edge solutions based on modern technologies, organizing raw commodity trading, supporting dual listing for issuers of the WSE and the Armenian Stock Exchange, and providing a modern trading platform.

“We see many areas where we can enhance the development of Armenia's capital market. Priority areas include digitization and process automation, which are now key pillars of stock exchanges in developed economies. The potential acquisition of the Armenian Stock Exchange will help us expand our services and undertake the implementation of the #GPW2022 strategy. On the other hand, it will also make WSE Group's 'know-how' available to the Armenian Stock Exchange,” pointed out Marek Dietl, President of the Management Board of WSE.

The consolidated revenue of the WSE in 2019 was 6.4 million Polish zlotys (1.71 million USD), with an EBITDA of 2.0 million zlotys (0.53 million USD) and a net profit of 1.3 million zlotys (0.35 million USD). As of December 31, 2019, the total assets of WSE amounted to 6.5 million zlotys (1.73 million USD). The preliminary non-binding valuation of WSE's 100% equity is equal to the company's book value as of June 30, 2020, which is approximately 6 million zlotys (1.6 million USD). The price for the potential acquisition of a stake in the Armenian Stock Exchange by WSE will be confirmed after the conclusion of the necessary studies.

“We are pleased to have reached an agreement with WSE on the framework for our further cooperation. This mutually beneficial deal has long-term strategic significance for both parties, and we are also pleased to note that we see WSE as a partner that shares our vision for the further development of capital markets. WSE's leadership in this undertaking allows them to bring their expertise and 'know-how' and make the Armenian Stock Exchange a robust, innovative, and convenient platform for investors, serving as a gateway to new markets. This will also lead to achieving our mutual aspirations for regional expansion,” said Martin Galstyan, President of the Central Bank of Armenia.

The primary business of WSE is organizing trading in financial instruments and conducting the operations of a clearing house and payment settlement company for transactions in financial instruments in Armenia. The company is headquartered in Yerevan, the capital of Armenia. The Central Bank of Armenia currently controls 90.1% of the Armenian Stock Exchange. The remaining 9.9% consists of shares of the Armenian Stock Exchange. After the transaction, the Central Bank of Armenia will retain 25% of the Armenian Stock Exchange, while the remaining 10% will be acquired by a third party designated by WSE.