Wednesday, September 7, 2011

Rail Freight Company Shares to Go On Sale as Ocean Container Trade Threatened

Freight One to be Auctioned Next Month
Shipping News Feature

RUSSIA – On the 28th July the Government of the Russian Federation mandated that an auction be undertaken for the sale of shares in joint stock company Freight One which, as the largest rail freight cargo carrier in a country with the second largest rail network in the world, makes it an interesting proposition for many heavy hitting investors.

Bidders will have the opportunity to take place in an open auction for the purchase of 64,239,325,613 ordinary shares of Freight One, or 75% minus 2 shares of the company, with the bidding starting at an initial price of 125.375 billion roubles ($4.25 billion), with subsequent bids proceeding in 500 million rouble increments. The decision to sell was taken by the Board of Directors of Russian Railways in Protocols Nos.6 and 14 on 19th April and 30th August, 2011 and the auction notification was announced by the TransCreditBank, with which Russian Railways has close financial ties.

Freight One is the largest operator of rail transport cars in Russia and also acts as a freight forwarder and rail haulier both delivering and leasing its rolling stock of over 235,000 rail cars. Potential bidders must conform to certain prescribed eligibility requirements and proposals must be submitted for the price of shares in an open form.

Several bidders are known to be taking an interest with four reported to have made initial enquiries, subject of course to the usual denials of interest. Freight One was a child of the country’s push toward privatisation four years ago and the largest private rail freight haulier, Globaltrans, has reportedly expressed an interest. Last week Globaltrans published its first six months figures for 2011 showing a year on year rise in revenue of 48% to $603.6 million with profits up 66% period-on-period to $159.3 million and earnings per share up by 85% to $0.85 per share.

Recently Globaltrans announced its intention of aggressively seeking to take trade from water borne transport, particularly high value goods such as electronic and automotive products moving from Asia to Europe. The company is running four trains a day into Russia from the Sea of Japan port at Vostochny and cargo includes Hyundai products from Korea plus Japanese and Chinese manufactured items. The move heats up the market for such companies as MOL who started competing trans- Siberian container services just last year.

Shipping via the trans-Siberian rail route can cut delivery times by two thirds to three quarters in some cases but obviously works best for time sensitive shipments which can command premium rates and access to Freight One’s level of equipment would enable Globaltrans to increase their currently minimal box carrying capacity, reportedly around 450 wagons, enormously on tracks capable of carrying far greater volumes.