UPDATE 2-Vienna, Warsaw bourses discussed merger-source

Tue Apr 9, 2013 11:27am EDT

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* Talks won't necessarily lead to deal - source close to talks

* Tie-up would bring together region's top two exchanges (Adds comments, context on exchange mergers)

By Angelika Gruber and Chris Borowski

VIENNA/WARSAW, April 9 (Reuters) - The Vienna Stock Exchange and the Warsaw bourse have discussed merging to create a regional hub for share trading in central and eastern Europe, a source said on Tuesday.

A combination of the two would bring together central and eastern Europe's two biggest exchanges by the value of their listed companies.

"Some talks were held. But these are very preliminary and may not necessarily lead to a deal," a source close to the discussions told Reuters.

Shares in the Warsaw Stock Exchange were up 1.4 percent by 1418 GMT, valuing the company at 1.61 billion zlotys ($508.54 million).

The Polish operator, which has maintained a steady stream of new listings over the last few years despite Europe's economic troubles, is home to 438 companies with a total market capitalisation of nearly 700 billion zlotys ($221 billion).

CEE Stock Exchange Group, parent of the Vienna Stock Exchange and which also controls the Hungarian, Czech and Slovenian bourses, hosts companies with a combined market value of 129 billion euros ($168 billion) across the four exchanges.

With declining trading volumes putting pressure on profits, and increasing regulation raising costs, the temptation to consolidate is strong.

Last year Atlanta-based IntercontinentalExchange Inc sparked another round of consolidation when it agreed to buy NYSE Euronext for $8.2 billion, while in February, Deutsche Boerse denied a report it was in deal talks with CME Group Holdings Inc. {ID:nL6N0BP9PM]

READY TO CO-OPERATE

Warsaw Stock Exchange board member Beata Jarosz told a Polish Capital markets event in London on Tuesday that the bourse was open to the idea of consolidation.

"We are ready to seriously consider joining with pan-European consolidation process," she said.

"In the future we want to have a partner from the region, from Europe. As far as today's information, I am not in a position to comment on it."

A spokeswoman for the Austrian operator said the bourse was interested in some form of co-operation, but declined to elaborate.

For years the pair have been vying to establish themselves as the listings hub for central and eastern Europe.

Warsaw has overtaken its Austrian rival as the region's top exchange by the value of its listed stocks thanks to the flotation of several large state enterprises and a wave of foreign listings, especially from neighbouring Ukraine.

The Warsaw exchange, which was itself listed in 2010, is 35 percent owned by the Polish government.

"At some time in the future ... we will sell. We will fully privatise Warsaw Stock Exchange," deputy treasury minister Pawel Tamborski told the London event. "When? How? These are very good questions, we still have all options open."

Tamborski said for the time being, having some Polish influence on the exchange was important for its continued development and that of the country's capital markets.

"The development of the capital markets in Poland is very high on the agenda of the government," he said. ($1 = 0.7682 euros) ($1 = 3.1659 Polish zlotys) (Additional by Philip Baillie and Kylie MacLellan in London; Editing by Carmel Crimmins, David Holmes and Louise Heavens)

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