In the coming months, the privatization process of the Cyprus Stock Exchange (CSE) is expected to begin, which will last 14 months. This is the strategic choice that is preferred. However, before the privatization, improvements in its working operation will be sought, with immediate achievable results and the development of strategic partnerships. At the same time, the state will have to restructure the organization, based on a detailed business plan and to invest limited or no funds before the privatization of the CSE.
Two scenarios on the table
According to a study carried out for the government by the “ACL Consortioum” consortium, the CSE could be privatized through two scenarios. The first provides that the CSE remains as it is and that a state-owned group of privately owned subsidiaries be created under it, wholly owned by the state. All of the above liabilities will first be transferred to the subsidiaries, which will be sold to the investor, after the employees have been absorbed by the public or the wider public sector, or they will be offered a voluntary early retirement plan. The other scenario envisages the enactment of legislation, by which the CSE will cease to exist and a group of successive companies will be formed that will be owned by the state and then will be sold to a private investor.
Ok from Ministerial
It is worth noting that the proposal for the immediate privatization of the CSE was submitted, through a study carried out by the “ACL Consortioum” consortium, which was selected by the government after an open tender. In a letter, the Minister of Finance Konstantinos Petridis to the members of the parliamentary Finance Committee, notes that the ministry, after studying and evaluating the views of the consortium included in the study and after consulting the board of the CSE, adopted the specific suggestions and favored the strategic choice for immediate privatization of the stock market as the most feasible and advantageous for the state.
Last May, the Council of Ministers approved the strategic choice of privatization, the establishment of the coordination team and the implementation team of the project, which includes executives of both the Ministry of Finance and the CSE. The groups will take action to implement the privatization of the Cypriot stock exchange. It is noted that a competition has been announced for the recruitment of external consultants to implement the privatization decision. The external consultants will be overseen by the coordination team and the project implementation team. A total of 5 bids were submitted by external consultants, which are evaluated by the Evaluation Committee. As Mr. Petridis notes, “the next steps include the completion of the evaluation of the bids within the first four months of 2021 and the selection of external consultants, who will act for the implementation of the strategic selection for the CSE, which according to study is expected to last about 14 months “.
The consortium proposed four feasible strategic options for the CSE, choosing that of immediate privatization. It was estimated that the budgetary impact of this option will be around € 6.2 million. In fact, based on this decision, any recapitalization requirements of the CSE will be borne by the new owners, unless the state decides to remain co-owner, with a small participation . Regarding the cost of reorganization, this will be sufficiently covered by the existing cash available on the CSE, provided that the privatization process is completed within the stipulated time frame (14 months). The composition of the consortium is based on the fact that the state will not be able to invest funds and develop the CSE or to remain a co-owner of the CSE.
At the same time, the consortium estimates that the immediate privatization of the stock exchange will act as a catalyst to improve the confidence of stakeholders in the CSE, as it keeps pace with current privatization trends in the global and regional stock market. Also, this option is considered to have a positive impact on the Cypriot economy.