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VTB successfully completes acquisition of Moscow city government’s 46.5 per cent stake in Bank of Moscow

The Financial Times Wednesday reported VTB has completed its acquisition of a 46.5 per cent stake in Bank of Moscow. The stake was acquired from the Moscow city government. The investment moves the Russian state Bank closer to gaining control over the heart of a financial empire run by allies of the former Moscow mayor Yury Luzhkov, reported FT.

In a Tuesday announcement, VTB said it acquired the city hall stake together with a 25 per cent controlling stake in Moscow city insurer Capital Insurance Group. The insurer’s acquisition cost approximately 103 billion Russian roubles.

VTB recently raised a whopping $3.3 billion via a secondary public offering. VTB is keen on acquiring 100 per cent stake in Bank of Moscow. The Bank of Moscow is currently Russia’s fifth largest bank in terms of assets. VTB’s move is aimed at accelerating its expansion in Moscow’s retail market.

However, its plans have encountered opposition from Bank of Moscow’s managers. Andrei Borodin, Bank of Moscow chief executive officer and a confidant of the former city mayor is opposed to the state bank’s plans. The VTB investment marks the first such big asset carve-up since Mr. Luzhkov’s ousting as Moscow mayor.

There has been an ongoing battle between the former mayor’s allies and the state bank VTB. Mr. Borodin and other senior managers at Bank of Moscow are de facto controllers of the bank, and the Moscow offices of Inteko, the property business established by Mr. Luzkhov’s wife while he was still in office.

The former Moscow mayor is currently under investigation over alleged embezzlement of $433 million from the bank in a 2009 real estate deal involving his wife. The corporate battle has seen a Bank of Moscow shareholder institute a defense against VTB, filing a suit seeking to revise a previous decision agreed on at a shareholder meeting, in which VTB sought election to the Bank’s board.

However, the management on Friday stepped up the battle, cancelling an extraordinary shareholders’ meeting that had been due to elect a VTB representative as the bank’s president. At a shareholder meeting on Monday, the management team held sway, winning eight places on the 15-member board of directors for its representatives, while VTB gained five seats, said FT.

VTB is eyeing the bank for its vast branch network concentrated in Moscow, which boasts 9.5 million depositors, which would nearly double its retail client base.

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