Warsaw vows to go it alone as big-bourse mergers lose steam

The Warsaw Stock Exchange, just upgraded to “developed-market” status by index compiler FTSE Russell, isn’t interested in teaming up with any global peers as it seeks to develop alone by dipping into its cash pile to upgrade technology.The tide has turned against tie-ups after the merger of Deutsche Boerse AG and London Stock Exchange Group Plc faltered earlier this year, the Polish exchange’s chief executive officer, Marek Dietl, said in an interview. Instead, he plans to deploy as much as 200mn zloty ($56mn) on projects that will expand Warsaw’s offer and help it catch up with bigger competitors in Europe, who generate a relatively larger chunk of their revenue from sources other than trade in stocks and commodities.“The abandoned merger by the global bourses shows it’s not a good time for big deals,” Dietl told Bloomberg in Warsaw. “We need to make use of our cash and invest in new projects that give hope for growth in these turbulent times of IT changes.”Deutsche Boerse failed to clinch a deal with the LSE earlier this year, in what was an attempt to create a European champion that could counter US-based heavyweights. The Frankfurt-based exchange remains on the prowl for new technological ventures, and was said to be close to taking a minority stake in San Francisco, US-based data company Trifacta Inc. Dietl, a former venture capitalist, has taken notice of the shifting approach.FTSE reclassification: The Warsaw bourse’s history of tie-ups is mixed. It acquired Polish Commodities Exchange TGE in 2012, adding a stable revenue stream from power and gas trading, and a year later bought a stake in London-based equities platform Aquis Exchange Ltd, which remains unprofitable. Three years ago, merger talks with Wiener Boerse AG collapsed and the biggest exchange in former communist Europe opted to focus on “organic regional growth.” This year brought a revival of public offerings in Warsaw and foreign-capital inflows even as the current government halted privatisation, for years the source of the biggest IPOs. Poland’s stocks were reclassified as developed-instead of emerging-market at FTSE Russell at a time Poland’s leaders are rebelling against the western democratic values the nation adopted after the collapse of communism in 1989. Dietl, 40, expects new technology initiatives to help reduce a valuation gap between Warsaw’s exchange and its Western rivals. The company, which lacks a vibrant derivatives market, trades at 12.6 times its projected 2017 earnings, compared with as much as 21 times for the biggest European exchanges.Warsaw’s benchmark WIG20 Index has gained 45% in dollar terms this year, trailing only Riga’s OMX gauge among European Union markets. Warsaw Stock Exchange shares gained 0.3% to 43.33 zloty in the Polish capital. The chief executive plans to present a strategy update for the exchange by mid-2018, when he hopes to win another term, including on how to spend some of the company’s 450mn zloty cash pile.“We have a lot of cash, which as a venture capitalist, I would prefer to spend on new projects rather than keep on our accounts,” he said. “If we don’t see any good investments for such a sum, we may consider eventually offloading the cash.”