Delo acquires majority stake (50% + 2 shares) in TransContainer
Considered the "underdog" for the auction, Russia’s leading port container operator Delo has acquired the 50% + 2 shares controlling interest in Russia’s largest rail container operator TransContainer from the state-run railway monopoly Russian Railways (RZD).
At the auction in late November, Delo paid Rub60.3B (around US$937.65M), or almost twice the opening price of Rub 36.16B, for 6,947,391 ordinary shares with a nominal value of Rub1,000, according to RZD’s deputy head Andrey Starkov.
In such a way, Delo overcame its two rivals, Yenisei Capital (YC), whose ultimate beneficiaries are Chelsea FC’s owner Roman Abramovich and his business partner Aleksandr Abramov, and Freight One, an arm of Russian steel baron Vladimir Lisin.
Prior to the tender, TransContainer’s stake was divided between RZD (50% plus 2 shares), YC (24.74%) and Russia’s VTB banking group (24.84%), with the free float of 0.42%.
YC, which acquired a 24.5% stake in TC from the Blagosostoyaniye pension fund (BPF) affiliated with RZD for an estimated US$260M in January 2018 and has been enjoying dividend bounty since then, was widely considered a favourite of this year’s auction.
Forbes estimates Roman Abramovich and Aleksandr Abramov’s personal fortunes at US$12.4B and US$6.2B respectively. Vladimir Lisin is believed to be even richer with US$21.3B.
Meanwhile, Delo’s owner, Sergey Shishkarev, reportedly had no own funds of his own in the auction - last year, Delo bought a 30.75% stake in Global Ports (GP), the Russian port sector’s major player, for an estimated US$240M. Before that Delo focused mainly on the development of its transport and logistics assets based at the Russian Black Sea harbour of Novorossiysk.
Brushed off by his rivals, Shishkarev was able to borrow funds from Sberbank, one of Russia’s key lenders. He fought to the finish and won the 120-plus-step battle (the initial increment was Rub 141M (US$2.2M) and all of the successive steps Rub 200M (US$3.1M) each).
Set up in 2006, TransContainer accounts for around half the overall volume of rail container transportation in Russia. It operates 46 owned terminals all over Russia and 19 in Kazakhstan, co-owns the Central Asian country’s largest rail terminal operator KedenTransService, and one terminal in Slovakia. It has around 64,500 high-capacity containers and runs a fleet of more than 24,000,000 flatcars to transport them.
The company reported a 58% year-on-year growth in its net incomes (to Rub10.485B or US$163M) during the first nine months of the current year. Its total revenues increased by 14.4% to over Rub 63.762B (US$991.45M) over the three quarters period.
As of 30 September 2019, TransContainer’s assets were estimated at Rub75.465B (US$1.173B), while total debt amounted to Rub11.570B (US$179.91M). It posted about US$146M of net profit for 2018, up 45.5% year-on-year, its assets estimated at US$1B.
“Control over TransContainer coupled with Delo’s presence on the country’s Black Sea, Baltic and Pacific coasts will help us evolve into a nationwide logistics transport integrator,” said Shishkarev.
Before the auction, Shishkarev called on domestic freight forwarders to pay more attention to the sea arm of multimodal transportation schemes. While oreign lines account for the bulk of container shipping from Russia’s seaports, Russian players should, according to him, be able to compete at least with Greek and Turkish shipping operators in Novorossiysk-Mediterranean sea lanes.
This year, Delo has completed construction of deepwater berth No. 38 at its Novorossiysk-based NUTEP container terminal, which is expected to help avoid double cargo handling at Mediterranean harbours and reduce cargo transportation costs.
In addition, Delo, along with Maersk, launched a transcontinental multimodal container service this year. It takes 18 days to deliver containers from South Korea to Poland’s port of Gdansk, including 14 days of overland transit across Russia from the Pacific harbour of Vostochny to Saint Petersburg on the Baltic shore.
Finally, having collaborated with Maersk in arranging a 28 days-long passage along the Northeast Passage last year, Delo is set to put a special emphasis on the development of Trans-Arctic shipping.
The Maersk trial sailing was not a huge success, but this has not deterred Delo.
The group’s interest in the topic seems to be so keen that it is reportedly prepared to offer up to 30% in its management company to RosAtom, the state-held nuclear energy corporation that is an exclusive developer and operator of Russia’s Arctic infrastructure.
According to anonymous sources close to both Delo and RosAtom, the two sides entered into negotiations before the Transcontainer auction took place.
In March 2018 Russia’s president Vladimir Putin stated that the cargo traffic through the Northeast Passage should increase tenfold to 80 Mtpa by 2025. To reach the goal, says RosAtom’s director general Aleksey Likhachev, public and private investments are required.
It is planned to invest US$7B in the development of relevant subpolar transport and logistics infrastructure and creation of a Trans-Arctic container operator, which is expected to launch a pilot service in 2024. By 2028, the new operator is due to reach an annual transportation volume of 30 Mtpa.
Some US$5.8B would be earmarked for the construction of a dedicated Arctic fleet of 33 container ships. 70% of the necessary funds would be raised under project lending and 30% from own and co-investors’ financing.
Russia has long seen the Northeast Passage as its natural transport corridor and looking to put its competitive advantages to good use. The route is 40% shorter that the traditional sea route between the Far East and Europe via the Suez Canal. However, Arctic navigation requires substantial investments in development of diesel- and nuclear-powered icebreakers.
In the meantime, having gained control Transcontainer, Delo is obliged to offer a buy-back option to the other shareholders. Shishkarev says he expects to cooperate with VTB in running the rail container operator, while still borrowing funds from Sberbank. It is believed that Delo may need up to Rub120B (US$1.866B) to buy back the shares.
Delo is not allowed to sell the shares in Transcontainer or in its own capital stock; otherwise a penalty amounting to 25% of the deal cost is to be paid. It also has to fufil Transcontainer’s existing transportation plan.