Bank Acquisition of Strabag Shares Reduces Exposure to Russia

Summary

  • RBI, through its Russian subsidiary, has declared its intent to purchase 28.5 million shares in Strabag for a cash consideration of 1.510 billion euros ($1.66 billion). The move would lower the equity of the Russian subsidiary.
  • The purchase will further lessen RBI’s exposure to Russia.
  • The impending Strabag stake is being put up for sale by Russia-based Rasperia Trading Limited.
  • RBI has been considering a spin-off or sale for its business in Russia since the country’s aggression on Ukraine in 2022 but has issued a warning that an exit might require some time and may be “highly intricate”.
  • RBI has said it will persist with the efforts on a sale, or opt for a spin-off if necessary.
  • The Strabag stake, once procured, would be moved from RBI’s Russian subsidiary to RBI, where it will be held as a long-term investment.
  • Several overseas businesses have exited Russia since its extensive invasion of Ukraine in February 2022 as Western sanctions increased the challenge to stay, yet the Kremlin has also commenced measures to control asset sales.

RBI to Buy Strabag Shares

The bank announced its plan to purchase 28.5 million shares in Strabag via its Russian subsidiary for a cash consideration of 1.510 billion euros ($1.66 billion). This step will lower the equity of the Russian subsidiary.

Reduced RBI Exposure to Russia

RBI stated that this operation would further reduce its engagement in Russia.

Sale of Strabag Stake

It has been informed that Rasperia Trading Limited, located in Russia, is selling off the Strabag stake.

RBI’s Plans in Russia

Ever since the invasion of Ukraine by Russia, RBI had been contemplating a spin-off or sale for its business in the country. It warned, however, that an exit could be time-consuming and “extremely complicated”.

Tightening Bank Ties with Russia

Meanwhile, the European Central Bank constantly pressurizes banks to weaken their ties with Russia.

Possibility of a Spin-off as a Fallback for RBI

RBI assured that it would continue to pursue a sale or consider a spin-off as a contingency plan. The Strabag stake would then be transferred from the Russian subsidiary to RBI, which it intends to keep as a long-term investment.

Businesses Pull Out of Russia after Ukraine Invasion

Many foreign businesses have withdrawn from Russia since its wide-scale attack on Ukraine in February 2022. The western sanctions have made it tougher for them to remain, but the Kremlin also took steps to regulate asset sales.

Transaction Depends on Compliance and Regulatory Approvals

RBI confirmed that the success of the transaction would depend on its own regulatory compliance checks and other regulatory approvals.

The exchange rate used is $1 = 0.9112 euros.

The implications of this strategic move by RBI could impact the forex and trading market, particularly the EUR/USD pair due to the transaction’s substantial euro volume.

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