Paving a new infrastructure order
As universal lenders retreat from key markets, VTB Capital is pushing hard into industries that will increasingly define the 21st century, from ports services to infrastructure and logistics, building strong and enduring relations with a host of powerful corporates in the global ascendancy.
Speaking at the RUSSIA CALLING! Forum, an annual symposium that brings together global institutional investors with many of Russia’s leading corporates, Peter Stonor, Head of Transport, Infrastructure and Industrials at VTB Capital, pointed to a "changing of the guard" taking place across the infrastructure sector. In recent months, the emerging markets-focused investment bank has advised on a series of major infrastructure deals that "further strengthen VTB Capital’s global transportation and infrastructure franchise. We have completed more than 40 deals with an aggregate value of $30 billion over the past five years. This underscores our high level of expertise in this segment of the international market."
VTB Capital’s success has not happened overnight. Founded at the height of the financial crisis, the institution hired heavily during the dark years of investment banking and is now reaping the benefits. Since 2008, it has taken part in more than 555 equity and debt capital market deals, which have proved instrumental in attracting more than $231 billion-worth of investments to Russia and the CIS region. But it has also been willing and able to put its balance sheet and its advisory team to work far from home – nurturing and assembling complex long-term M&A deals between corporates that, in some cases, have little or no Russia connection. That further underlines VTB Capital’s burgeoning reputation as a global investment bank in the making.
Take a trio of cross-border advisory deals that highlight its increasingly global identity and standing. In September 2015, it acted as financial adviser to Hong Kong-listed conglomerate China Merchants Holdings International (CMHI), which joined forces with mainland marine company COSCO and sovereign wealth fund CIC to buy a 65% stake in Turkish container terminal Kumport. In so doing, VTB Capital, says Stonor, has been able to profit from two key insights shaping the infrastructure industry.
The first is improving corporate-to-corporate and state-to-state relations between fast-growing emerging markets: in this case, China and Turkey. CMHI, Stonor said at the RUSSIA CALLING! forum, could clearly see the benefit of buying a majority stake in a port facility located in the heart of Istanbul, Turkey’s largest and most important commercial hub. The deal marked the "largest-ever investment in Turkey by a Chinese corporate," notes Stonor, who adds that VTB Capital was "perfectly positioned to advise given our insight into investment flows between the two countries".
The Russian investment house is ideally placed to benefit from increasing capital flows between emerging markets, and a concomitant push by developing-world corporates to build their own regional and global empires. "We are focused heavily on growing emerging markets, so our nexus of operation stretches from Russia, through the likes of China, India, Africa and Turkey," Stonor said at the forum. Add in Brazil, and you have the full set of BRIC nations set to dominate emerging-market and South-South trade for years to come.
Stonor also notes that VTB Capital has benefited not only from its ability to plan for the long term, but from the retreat from once-vital growth markets of universal lenders, particularly those based in London, Paris and Frankfurt. "We now occupy a gap in cross-border investment flows between emerging markets that once was filled by European lenders," he says.
VTB Capital was also quick to identify and adapt to Beijing’s continuing attempt to rebuild the Silk Road, under the 'One Belt, One Road’ aegis, which will create new trade routes linking China’s capital with Europe and Turkey, via Russia and Central Asia. "The Silk Road initiative fits very well with us and our long-term strategy, as it spans all the markets we cover, and intend to continue to cover," says Stonor. "We have a very active pipeline of international private-sector deals that link together through the new Silk Road. That is a direct result of our investments across the region over the past five years."
Moreover, VTB Capital was quick to identify a second key change taking place in the infrastructure, ports and logistics sectors. A once-fragmented maritime logistics sector is rapidly consolidating, creating powerful pan-industry alliances between major players. Family-run groups are selling up as powerful developing-world corporates push aggressively into new regions and territories. Scale and capital are becoming more important than ever, as a new generation of larger, more efficient container ships able to dock in deep-water ports and navigate a wider Panama Canal roll onto the market.
Another pair of multi-billion-dollar VTB Capital-advised deals point to its increasingly influential role advising on cross-border transactions. The first, announced in October 2015, involved the Russian investment bank co-advising Turkey’s Yildirim Group on its acquisition of a 63% stake in Portuguese port operator Tertir. That transaction is the largest-ever Turkish investment in Portugal, and helped Yildirim significantly to increase its annual container handling and bulk cargo capacity. "The company is growing very rapidly globally, and this allows them to push into Portuguese-speaking Africa and Latin America," VTB Capital’s Stonor said at RUSSIA CALLING!. "It also pushes us into second place this year in Turkey’s M&A league tables."
The investment bank also announced in mid-October that it was advising Portuguese investment fund Finpro on the sale of its stake in Spanish port company Grup Maritim TCB, which was acquired by Netherlands-based APM Terminals for around $1 billion. That deal was "another sign of the consolidation that continues to take place" across the ports, infrastructure and logistics sector, adds Stonor. "It marks our first M&A transaction into Spain, and our second major Portugal-connected transaction," he adds. "Portugal specifically, and Iberia as a whole, offer great investment channels into emerging markets. We have a number of other cross-border M&A deals bubbling along at the moment, so we are leading on all fronts, and aim to continue to do so for years to come. VTB Capital is in a very good place."