Thursday, September 27, 2012

Logistics and Freight Forwarding Purchase Can Spur Russian Rail Cargo Improvements

RzD Take the Plunge in Long Predicted GEFCO Deal
Shipping News Feature

FRANCE – RUSSIA – PSA Peugeot Citroën has announced that it had finalised negotiations with Russian Railways (RzD) following a binding offer to acquire 75% of its shares of the freight forwarding and automotive logistics specialists GEFCO, a PSA Peugeot Citroën subsidiary. The implementation of this strategic partnership is intended to benefit both groups and enable GEFCO to increase its growth by combining its strengths with those of RzD.

The PSA Peugeot Citroën board recognized the bid from RzD as the most attractive when accepting the €800 million bid. The collaboration with RzD should provide a stable environment for the operation and development of GEFCO with a minimal level of corporate risk and RzD intends to retain the management of GEFCO and all its existing business units, including those which provide services to PSA Peugeot Citroën.

The logic of the deal is for GEFCO to enhance its geographic expansion strategy in China, India and Latin America, and also accelerate its growth in Eastern and Central Europe, particularly in Russia whilst GEFCO can also diversify its business base thereby upping turnover with a view to becoming a more major force in global supply chain logistics.

The acquisition of GEFCO will allow RzD to increase European/Asian trade and possible ‘Westernise’ some of the parent company’s transport practices enabling RzD to offer competitive multimodal services along this transcontinental route following recent infrastructure developments in the regions concerned. GEFCO gives RzD a competent logistics server to round off its own transport options.

RzD has high hopes for the acquisition, having rustled up capital through recent asset sales it can put the money to work building a truly international business and is already saying the deal could actually stimulate the Russian economy by opening up trade lanes hitherto closed due to inexperience which can be bypassed with the expertise GEFCO possesses. The deal reputedly has earned PSA Peugeot Citroën a ‘special dividend’ of €100 million and a shareholders agreement included is designed to ensure the protection of both parties’ interests as well as making certain that the integrity and efficiency of GEFCO is maintained.

The deal is subject to the usual anti trust approvals and, whilst Peugeot are no doubt pleased with the sale it is believed by most market analysts that RzD stand to be the big winners provided they can adapt their own style where and when the French groups own expertise is demonstrably an improvement over the Russian company’s traditional way of doing business.