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Uralsib - Russia Daily Equity Update, TRANSPORT - Oct 11 , 2011.



Tender to take place no earlier that 1Q12

Government to proceed with sale of Russian Railways' stake in TransContainer and decide on tender terms soon. The

Russian government may sell a 25-50% stake in TransContainer following consultations with interested parties, including Transportation and Economic Development Ministry officials, Russian Railways representatives and potential bidders. Most bidders prefer to acquire a controlling stake in TransContainer, while Russian Railways is lobbying to sell only a blocking stake. Currently, state-owned Russian Railways is a controlling shareholder in TransContainer, while FESCO owns a 13% stake and other minority stakes are owned by the EBRD and Russian Railways' pension fund Blagosostojanie. TransContainer has a 17% free float.

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Several investors are interested in bidding. So far there are several strategic investors who are expected to bid for Russian Railways' stake in TransContainer, including the diversified cargo operator FESCO (FESH RU - Not Rated), which has accumulated nearly $0.5 bln in cash on its balance sheet and confirmed its interest in bidding for a controlling or blocking stake in TransContainer during a recent conference call with management. GlobalTrans (GLTR LI - Buy), UCL Holding (Vladimir Lisin) and Summa Capital are among other potential bidders. Previously, GlobalTrans announced its decision not to participate in another tender in the rail transportation industry for 75% of Freight One, which is scheduled for the end of this month. Although currently Global- Trans is not focused on container cargos, there could be a synergy within N-Trans Group with GlobalPorts' container handling business.

Buyout offer to minority shareholders is possible, but market is not supportive on tender price. Following the tender, the

winner should make a mandatory offer to shareholders of TransContainer not below the tender price. In 1H11 a 25% stake in TransContainer was appraised at RUB10.7 bln ($0.33 bln), implying a 13% premium to the current GDR price. The appraisal should be updated in order to incorporate a premium for control (if a 50% stake is sold) and recent industry trends, according to the company. The tender will likely take place no earlier that 1Q12, given the lengthy tender preparation process. The current macro environment and, in particular, a weak ruble bring risks to the case of TransContainer, whose shares are traded at a 16% premium to international peers on 2011E EV/EBITDA.




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Publication:Russian Banks and Brokers Reports
Date:Oct 14, 2011
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