KEY POINTS:
Moscow-based billionaire New Zealander Stephen Jennings has agreed to sell half of his Renaissance Capital investment bank to Russian metals oligarch Mikhail Prokhorov for a fraction of the business' estimated value before the credit crunch.
Prokhorov is reported to be paying US$500 million ($725 million) for new shares
in the company, giving him a stake of 50 per cent minus one share.
The deal comes less than a week after Russia's benchmark Micex Index dropped 25 per cent over three days, prompting regulators to shut down the sharemarket to help stem the worst rout in a decade.
Russia's government has pledged more than US$100 billion in emergency funding to help ease liquidity problems in the banking system and prop up the stock market.
Jennings reportedly rejected a US$4 billion offer for Renaissance Capital in January last year. Four months later, a group of Western investment banks, including Goldman Sachs, Morgan Stanley and UBS, valued the company at US$8 billion to US$10 billion.
"The rules of the game for investment banking globally have been totally rewritten in the last two months," Jennings said yesterday.
However he denied suggestions he had been forced into the sale by an urgent need for capital.
"We have no losses, no write-downs, no toxic debt. Rather than get into a situation where we have to react, we have decided to act proactively," he said after a news conference where the deal was announced.
"Would it have been better to do the deal six months ago? Obviously."
Renaissance Capital chief executive Alexander Pertsovsky said the freshly refinanced entity would occupy a "unique niche", possibly boasting more capital than any other investment bank in the world because of global restructuring.
Jennings and Prokhorov - who made his fortune in metals, banking and media and is now one of Russia's richest men - said they had been discussing the deal for "several months", but last week's market turmoil had accelerated the process.
Renaissance Capital was Russia's biggest bookrunner last year, helping arrange 12 of the country's 22 initial public offerings. It is also the seventh biggest arranger of rouble debt this year, helping to raise 17.2 billion roubles ($680 million), according to Bloomberg data.
Jennings, 48, who grew up in New Plymouth, is chairman and chief executive of Renaissance Group, of which Renaissance Capital is a division.
He founded the group in 1995 as communism gave way to capitalism and his wealth was estimated at $5.2 billion by Forbes magazine last month.
He will be in New Zealand next month to attend a business lecture.
STEPHEN JENNINGS
* Has been described as "the only foreign oligarch in Russia".
* Went to Russia in 1992 with Credit Suisse First Boston on a six-week assignment to work on the country's first privatisation.
* Founded Renaissance Group in 1995.
* Last month, Forbes magazine valued his stake in Renaissance Group at US$5.2 billion.
* Yesterday he agreed to sell half of investment banking arm Renaissance Capital for US$500 million.
* Before the credit crunch Renaissance Capital was valued at US$8 billion to US$10 billion.
- AGENCIES