Russian billionaire eyes Saudi Arabia for Renaissance growth

Mikhail Prokhorov's Renaissance Capital looks to broaden its shareholder base as it plans to expand into new markets
Billionaire Mikhail Prokhorov.
By Bloomberg
Thu 15 Mar 2018 03:20 PM

Billionaire Mikhail Prokhorov’s Renaissance Capital is looking to broaden its shareholder base as it plans to expand into new markets such as Saudi Arabia.

“Joining forces with a partner is one of the possible scenarios,” chairman Christophe Charlier said in an interview in Johannesburg. While “nothing is imminent,” a partnership with a sovereign-wealth fund is among the options.

A wider ownership base could improve perceptions about Renaissance Capital’s financial strength as it plans to expand in countries such as Saudi Arabia, where it would compete with global lenders from JPMorgan Chase & Co to HSBC Holdings. The kingdom is becoming more attractive to foreign companies as it overhauls its economy, looks to sell off state assets and attract more foreign investors.

“Renaissance Capital is looking closely at Saudi Arabia,” said Charlier, 45, a former investment banker at Renaissance Capital, who rejoined the company last April after serving as the deputy chief executive officer of Onexim Group. “We’re cautiously bullish and we’re following Saudi Arabia from the markets and research point of view.”

Prokhorov’s Onexim took over Renaissance Capital in 2012 after it ran out of cash following an aggressive expansion drive and loss of market share to domestic lenders. Prokhorov had purchased almost 50 percent of Renaissance Capital for $500 million four years earlier.

Renaissance Capital - which has offices in cities such as Johannesburg, Lagos, Dubai, London and New York, as well as equity research covering stocks in Bangladesh and Pakistan - is optimistic about changes in Angola and the outlook for Ethiopia, the chairman said. The bank last year got a license to operate in Egypt, where it is betting improved relations with the International Monetary Fund will unlock deals and boost capital markets.

Renaissance Capital is planning to increase its investment banking presence in sub-Saharan Africa from its base in Johannesburg, Charlier said. The bank slipped seven places to 29th in equity deals tracked by Bloomberg in 2016 and didn’t appear in 2017’s league tables. It ranked 27th in sub-Saharan bond deals last year.

“Our target is to get more business from South African companies seeking to do deals on the rest of the continent, as well as from companies operating in other African countries, managing a range of investment banking mandates from share sales and takeovers to debt issuances and sovereign Eurobond offerings,” he said.

Renaissance Capital, which in 2010 bought South African securities firm Barnard Jacobs Mellet Holdings Ltd., will also fill gaps in its equity coverage by promoting younger black analysts in line with the government’s drive to broaden ownership and diversity in the economy, said Johann Pretorius, the head of research.

Phago Rakale is being readied to cover property stocks, after working with banking analyst Ilan Stermer, while Siphelele Mhlongo is being prepared to initiate coverage on luxury goods and tobacco companies, after being mentored by Pretorius.

Research firms like Renaissance Capital are having to rethink how they can make money out of providing analysis following Europe’s revision of its Markets in Financial Instruments Directive, which means brokerages can no longer leverage their research as a way of getting money managers and pension funds to push trading through their desks. The company will continue to “spend lots of money” on its research, Charlier said.

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