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Sergey Shishkarev's group became the controlling shareholder of the operator.

The results of the auction for the sale of a controlling stake in TransContainer, Russia's largest container operator, turned out to be unexpected. Market participants expected Yenisey Capital controlled by Alexander Abramov and Roman Abramovich to win, however, the auction was won by Sergey Shishkarev's Delo Group as they had offered 60.3 billion rubles which is one and a half times more than the starting price. An offer to minority shareholders, including the abovementioned Yenisey Capital and VTB, will also increase expenses. However, the group hopes to convince the latter to retain its stake. This is a colossal leap in the scale of business for Delo Group, however an enormous debt caused by it raises questions.

The auction for the privatization of 50% plus 2 shares in TransContainer held by Russian Railways had unexpected results: Sergey Shishkarev's Delo Group became the winner. The deal is expected to be closed by the end of December. It will be financed by the group's own funds and funds borrowed from Sberbank.

Mr. Shishkarev admits that as a result the debt load of Delo will be "very intense". The total debt of the group is not disclosed. The debt of one of its core assets Deloports (which holds assets in the port of Novorossiysk) amounted to 21 billion rubles or 2.7 EBITDA in the middle of the year.

The Group acquired the stake for 60.3 billion rubles which exceeds the starting price of 36.16 billion rubles by 67%. Experts doubted that the starting price of the securities was adequate and according to Kommersant, the sale at such price would have brought a loss of over 6.5 billion rubles for its nominee holder UTLC.

According to Andrey Starkov, Deputy Managing Director of Russian Railways, more than 150 steps were made in the course of the auction. Two other bidders Yenisey Capital controlled by Alexander Abramov and Roman Abramovich and Freight One controlled by Vladimir Lisin were active participants of the auction.

Andrey Starkov, Deputy Managing Director of Russian Railways, June 7

We are selling not just business, but our key client that brings over 50% of payments for the services rendered by Russian Railways in the area of container shipping.

However, Sergey Shishkarev specified that one participant had quitted the bidding soon and they bargained with the other bidder from 38 billion up to 60 billion rubles. According to Kommersant, Yenisey Capital was persistent in its bidding. "We believe that the final price of this asset is not economically feasible, that's why we quitted the bidding," Freight One explained to Kommersant, "We think it is more important to focus on the implementation of investment plans of Freight One and strategic tasks."

Subject to the conditions of the deal Russian Railways can request compensation from the buyer, if the actual payment of TransContainer for the monopoly's infrastructure turns out to be lower than the planned level within two year. At the same time Mr. Starkov noted that the monopoly presumed that no such necessity would arise. He also clarified that if Delo Group decided to resell the stake within two years, they would have to pay Russian Railways 25% of the purchase price. In addition, Mr. Shishkarev said that the stake could not be sold earlier: "We are committed not to do this."

The purchase of TransContainer indeed changes the group's status dramatically. Elena Sakhnova at VTB Capital points out that after the deal Delo Group will enter all the segments of Russia's container market: the company has container terminals in all basins and now they also have the largest railway container operator. According to Mr. Shishkarev, he has taken a step towards achieving his dream that is to make the best transport company of Russia, "national champion".

However, the real costs will be significantly higher than the final transaction value. Mr. Shishkarev confirmed that as required by law the group would make a compulsory offer to the minority shareholders while negotiating with VTB (holder of 24.84% of TransContainer) lest it retain the asset and help to develop it.

He did not rule out any further exchange of VTB's stake in TransContainer for the KSK grain terminal owned by Delo Group. Representatives of Yenisey Capital that owns 24.74% of shares in TransContainer and has entered into an option agreement for the purchase of the stake owned by VTB, told Kommersant that they would make a decision on the offer as soon as they received one.

According to Mr. Shishkarev, so far Delo Group is planning "to reconsider the company's development plans, revise its strategy, hire more people within a short time". He also remarked that the group was interested in preserving the representatives of Russian Railways on the board of directors of TransContainer, and CEO Vyacheslav Saraev would remain CEO. However, Mr. Shishkarev did not rule out that in the future TransContainer could be delisted or consolidated with Global Ports, a 30.75% stake of which was held by Delo Group. He did not specify the exact period of time.

“Such results of the auction are an enormous success both for the seller (Russian Railways and the government) and for the buyer,” thinks Mikhail Burmistrov, General Director of INFOline-Analytics, “The price of the asset surpassed the wildest expectations raised in connection with the growth of stock quotes in view of the upcoming auction.”

For Delo Group the victory at the auction is an opportunity to make an IPO or partial offering after the consolidation of TransContainer is completed, and "success is almost guaranteed," assumes Mikhail Burmistrov. In his opinion, risks are associated with the higher debt load of Delo Group and unstable shareholding structure of TransContainer: basically, there are too major shareholders (taking into account VTB's option) with stakes close to 50%. Furthermore, he supposes that most likely the company will not have sufficient financial resources to buy stakes from Yenisey Capital and VTB under the offer, if the price of the shares corresponds to the level established after the auction.

Source – Kommersant dated 28.11.2019