The Lima Stock Exchange, LSE, and the Bolsa de Valores de Colombia, BVC, signed a Memorandum of Understanding to take the first steps to carry out the corporate merger of these two companies.
The merger will become the first international of its kind between two stock exchanges in Latin America, once it is approved by the General Meeting of Shareholders of the LSE and the Shareholders of the BVC, and approved by market supervisors in Peru and Colombia.
With the merger a new player will emerge more competitive to face the challenges of a globalized capital market, which will maintain and strengthen the CSE and LSE brands in Colombia and Peru, respectively.
The transaction will create value for both countries to allow joint development of a larger and more diversified capital market. From the figures for the end of 2010 the market as a whole will have a market capitalization of USD $ 378.000 million, and trading volume of USD $ 33.000 billion in their stock markets, U.S. $ 1,131,000 million in bond markets, USD $ 28.000 million in derivatives markets standardized USD $ 258.000 million in foreign exchange markets. This operation is independent of MILA Market Integration and undoubtedly accelerate that aim, it is clearly complementary to those objectives.
The tie up between the two exchanges will also strengthen commercial ties between both countries, bolster the growth pattern of the securities industry, creating synergies that will translate into shareholder value. The new company, taking into account the cumulative results of the last 12 months to September 2010, would have consolidated revenues of USD $ 45.8 million, EBITDA of $ 22.4 million and assets of USD $ 94.5 million.
The CEO of the LSE, Francis Stenning, said "the merger of the LSE and CSE generates a strategic alignment in the two countries, which strengthens our position in the capital market in the region and enhances and complements the integration of markets by leveraging a more rapid growth and solid."
For his part, President of the CSE, Juan Pablo Cordoba, said that "the agreement enhances the creation of economic blocs that transcend nations. Therefore, the merger represents an opportunity for our industry to increase company value through operational efficiencies and developing new products for both markets."
The success of this corporate merger is supported on all human capital to each stock that has given the experience and knowledge of their particular market. Consequently, management teams and work of both institutions (BVC and BVL) will continue to operate uninterrupted. The strategy of the merged organization and management policies and operation would be closely coordinated between the two administrations, following the guidelines set by their governing bodies.
Corporate Strategies (Colombia) and Capital LXG (Peru) are acting as financial advisors to the BVC, and Prieto & Carrizosa (Colombia) and Miranda & Amado Abogados (Peru), as its legal counsel. Likewise, the BVL is being advised by SUPPORT at the financial consultancy, and Payet, Rey, Cauvi Abogados (Peru), and Brigard & Urrutia (Colombia), on the legal.
Summary of the Memorandum of Understanding
To carry out this operation, it was agreed that the relative contribution of the CSE and the LSE to the merged entity will be 64% and 36% respectively. From this list of contributions will be set the exchange ratio for Class A shares and Class B issued by the LSE, in relation to the shares of the BVC. Thus, the new organization will only have shares (with voting rights) that will be entered in the National Registry of Securities and Intermediaries (RNVE) administered by the Superintendencia Financiera de Colombia and the Public Registry of Securities Market National Supervisory Commission for Companies and Securities Peru (CONASEV) and will be listed on the CSE and the BVL.
Shareholders of both companies will become shareholders of the merged entity.
From the point of view of the operation of both exchanges, and in accordance with applicable law in Peru and Colombia, both the LSE and the CSE will continue to operate in their countries as they have done so far, reporting to their boards and being supervised by the regulatory authorities in each country.
The Board of Directors of the merged company will be appointed by the shareholders of the entities involved and have a significant number of independent directors, which in any case not less than 40% of total membership. Initially, the Chairman of the Board of the merged entity will be a Colombian national, while the chairman of the LSE is a Peruvian national.
The steps in the process of fusion of the CSE and LSE are the signature of the agreement or proposed merger, once approved by the Governing Board of the CSE and the board of the LSE, the approval of the merger agreement or by the General Assembly of Shareholders of the BVC and the Shareholders of the LSE, and finally obtain the respective authorization by the Superintendencia Financiera de Colombia and CONASEV. The CVS and the LSE expects to complete the merger early in the second half of 2011.