The European Bank for Reconstruction and Development (EBRD) is entering exclusive negotiations to acquire a 10 per cent stake in Borsa İstanbul, in a landmark deal which will support Turkey’s efforts to reshape its capital markets.
Borsa İstanbul, majority-owned by the Turkish government, is the sole exchange entity in Turkey, created in 2013 by combining the Istanbul Stock Exchange, the Istanbul Gold Exchange and the Turkish Derivatives Exchange.
EBRD First Vice President Phil Bennett and EBRD Director for Insurance and Financial Services Noel Edison signed a term sheet in Istanbul today with Borsa İstanbul Chairman Talat Ulussever and Borsa İstanbul CEO Tuncay Dinç, paving the way for a pre-IPO investment in the stock exchange.
Expected to take place next year, the IPO is part of the government’s comprehensive plan to reshape Turkey’s capital markets and turn the country into a financial hub for the region spanning Central Asia, south-eastern Europe and North Africa.
“Borsa İstanbul is at the heart of Turkey’s ambition to become a financial centre for the wider region. As a shareholder in Borsa İstanbul we will support its efforts to become a leading stock exchange in terms of the number of listed companies and market capitalisation, reflecting Turkey’s economic potential,” Bennett noted.
Noel Edison, Director for Insurance and Financial Services at the EBRD, added: “This investment is part of the EBRD’s long-term strategy in Turkey to help the country deepen its capital markets. We will work to improve the efficiency and liquidity of the bourse to make it more attractive to domestic companies and foreign investors and will also help with the preparations for a successful public listing.”
“As a founding member of the EBRD, Turkey will benefit from the Bank’s direct investment in Borsa İstanbul. This long-term pre-IPO investment is yet another indication of the great potential of Turkish capital markets and Borsa İstanbul. We consider this strategic partnership to be another important milestone on the road to making İstanbul an international financial hub,” observed Borsa İstanbul’s CEO Tuncay Dinç.
Previously, the EBRD undertook a pre-IPO investment in the Moscow Exchange and invested in the Bucharest Stock Exchange. The Bank is also supporting SEE Link, an order-routing system established by the Bulgarian, FYR Macedonian and Zagreb stock exchanges and aimed at increasing liquidity and advancing standardisation among the connected bourses.
Deepening local currency and capital markets in the countries where it invests is a strategic priority for the EBRD. The Bank pursues this goal through investment, advice and support for reforms. Most recently in Turkey, the Bank has invested in YDA İnşaat’s first Turkish lira-denominated bond listed on Borsa İstanbul. It also works with the authorities on regulations and policies to further improve the functioning of capital markets.
The EBRD started investing in Turkey in 2009 and currently operates from offices in Istanbul, Ankara and Gaziantep. In just six years the Bank has invested over €5 billion in Turkey through more than 140 projects in infrastructure, energy, agribusiness, industry and finance. It has also mobilised over €12 billion for these ventures from other sources of financing. In 2014 Turkey became the leading recipient country of the EBRD, with new investments worth €1.4 billion.