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Abramovich and Lisin lost the auction for the sale of TransContainer. Sergey Shishkarev's Delo Group “passed” through 150 steps and almost doubled the starting price.

Sergey Shishkarev's Delo Group won the auction for the privatization of the railway operator Transcontainer. It outbid the companies of Roman Abramovich and Vladimir Lisin. The price of the asset rose up to 60.3 billion rubles which is twice the starting price.

Sergey Shishkarev's Delo Group won the auction for the sale of a controlling stake in TransContainer, Russia's largest container operator. 50% plus two shares were sold by Russian Railways. The winner offered 60.3 billion rubles which is almost twice the starting price of 36.159 billion rubles.

The auction step was 200 million rubles (the first leveling step amounted to 141 million rubles). A representative of Delo Group told RBC that the auction had lasted for about 45 minutes and there were 150 raising “steps”. According to Andrey Starkov, Deputy Managing Director of Russian Railways, the deal will be closed by the end of December. Proceeds will be committed to the implementation of the state-owned company's long-term development program.

There were three prospective buyers of TransContainer. Besides Delo Group, the current shareholder of the operator Yenisey Capital controlled by Roman Abramovich and Alexander Abramov (they held 24.74%) and Vladimir Lisin's Freight One participated in the auction.

The auction took place in the VTB Bank office building on Myasnitskaya street. Sergey Shishkarev and Igor Yakovenko, CEO of DeloPorts (a subsidiary of Delo Group) personally attended the auction, an RCB correspondent reports. Lisin's company was the first to quit, it only made "two or three steps". The company of Abramovich and his partners and Delo Group had fought to the last, a source close to the bidders told RBC.

Why did Abramovich and Lisin drop the deal

In April Sergey Karataev, CEO of Freight One, said that that the final decision on the purchase of TransContainer was to be made at a meeting of the Board of Directors or general meeting of shareholders, while financing was a "minor" issue. "The Company has a very disciplined approach to mergers and acquisitions by adopting rather strict criteria for the assessment and selection of target assets. We believe that the final price of this asset is not economically feasible, that's why we quitted the bidding," a representative of Freight One told RBC after the auction. According to him, the company decided to focus on investment plans of Freight One and strategic tasks.

The company controlled by Abramovich and Abramov, whose net worth is estimated by Forbes at 12.4 billion USD and 6.2 billion USD respectively, had been regarded as the most likely buyer before the auction took place. The businessmen had available funds to take part in the auction: in mid-March they together with their partners sold a stake in Norilsk Nickel for 550 million USD, and then sold shares in Evraz twice in March and in June. Their proceeds from the above transactions amounted to about 60 billion rubles. Back in 2018, Vyacheslav Saraev became the chief executive officer of TransContainer, before that he had been the head of Mezhegeyugol, a coal mining asset of Evraz Group. Sources of RBC close to different shareholders of TransContainer said that at the end of 2018 Yenisey Capital agreed to buy a 24.84% stake in the operator from VTB which is the third large shareholder of the company. In January 2019 VTB supported the election of three representatives of Yenisey Capital to the board of directors of TransContainer, as a result of which the company of Abramovich and Abramov had five representatives among 11 members on the board.

However, the businessmen were not willing to buy the controlling stake in TransContainer "at any cost", if Yenisey Capital did not win the auction, it could sell its stake to the winner, a source close to one of the shareholders of the operator had told RBC earlier. "We were ready for any option. But of course, we preferred to win and develop the asset," admitted an interviewee from Yenisey Capital on Wednesday.

How will Shishkarev finance the deal

Last week Shishkarev stated in an interview with the RBC TV Channel that the estimated fair value of 100% of TransContainer was 110 billion rubles. Despite the fact that only a small stake was traded publicly (only 0.42% of the shares in TransContainer were listed on Moscow Exchange), the market evaluated the company fairly, he added. In the end, he will pay for the company even more based on the value of 100% estimated at 120.6 billion rubles. After the auction results had been announced, the price of the shares in TransContainer dropped by 5%, but later after the end of trading it adjusted to -2.11%. Capitalization amounted to 116.02 billion rubles. At the same time since August 7, when the auction conditions were announced, the securities have risen in price by almost 25%.

Speaking of sources of funds required to participate in the auction, Shishkarev said that 25-30% of the stake price would be paid from the group's own funds, but the remaining part would be borrowed from Sberbank. Thus, Delo Group will have to pay up to 18 billion rubles from its own funds for its victory at the auction and remaining 42 billion rubles will be provided by Sberbank. However, the bank's contribution might be even bigger - up to 70% of the total transaction, as not only the controlling stake, but also minority stakes might be purchased at the bank's expense, a source close to Delo Group told RBC.

"Sberbank will contribute to financing the purchase of the controlling stake in TransContainer," said Anatoly Popov, Deputy Chairman of Sberbank. According to him, Sberbank is interested in financing the transport and logistics sector in Russia which demonstrates high development rates and in providing an entire range of banking products to companies in this sector.

The winner of the auction that has received the controlling stake in the company must put up an offer (a compulsory offer to buy) to other shareholders of TransContainer, reminds Sergey Saveliev, a partner at Saveliev, Batanov & Partners. Thus, Delo Group will have to make a compulsory offer to 50% minus two shares to Yenisey Capital and VTB, as well as 0.42% of the shares traded on the exchange. The offer price will be the highest of the following either the auction price (in this case 50% minus two shares will cost about 60.3 billion rubles) or the weighted average price on Moscow exchange for the last six months (about 53 billion rubles), reminds Saveliev. "They are obliged to make a compulsory offer to buy [the remaining shares from other shareholders]. When they do it, we will decide [whether to sell our stake or not]," a source at Yenisey Capital told RBC.

Shishkarev hopes that VTB will not sell its stake. "We will talk with VTB lest it remain the holder of the asset and help us to develop the company, we have a good dialogue," he said. VTB refused to comment if the bank is planning to sell its stake in TransContainer. VTB acquired a stake a year ago from FESCO Group, the largest shareholder of which is the businessman Ziyavudin Magomedov. Magomedov had been seeking the privatization of the container operator for long, but in March 2018 he was arrested on charges of organizing a criminal conspiracy. At that time Andrey Kostin, head of VTB, told journalists that the bank had purchased shares in TransContainer "definitely not for itself". "We are likely to be an intermediary, because we were a creditor there [for FESCO Group]," he explained. Simultaneously with the purchase of the shares, VTB entered into a delivery forward contract for the sale of these shares to "a third-party investor".

"Mutual interest" of Shishkarev and VTB.

While commenting on the further cooperation with VTB which has started collecting a "grain cluster" this year, Shishkarev pointed out that he has a "good dialogue" with the bank and "mutual interests in the grain business". "We partly share VTB's activities targeted at putting things in order in the grain market," the businessman said. At the same time a representative of VTB remarked that "their mutual interest is to enhance efficiency in the industry and develop grain production in Russia, to increase competitiveness of the Russian export of grain in global markets". "VTB is interested in selling high quality Russian grain using the established infrastructure in international markets directly to end consumers located in the largest and most promising markets, at the same time increasing the margin of Russian companies," a representative of the bank told RBC. The bank did not comment on the specific projects with Shishakarev's businesses.

Why do Shishkarev need a railway operator

TransContainer is an intermodal container operator that manages the largest fleet of containers (74.1 thousand) and flatcars (27.8 thousand) in Russia. In 2018 the company's IFRS-based net income grew by 45.5% and amounted to 9.5 billion rubles. The operator's proceeds increased by 17.4% up to 76.9 billion rubles.

"We saw the presentation of TransContainer management. I think it is a very high quality and well-prepared document. We think it feasible and plan to follow this strategy," Shishkarev said last week. "The only thing we plan to add is synergy from the consolidation of port and railway assets into a single business model," he added. Shishkarev also noted that he was not planning to change the management, and referred to his relationships with the CEO of TransContainer as to "trust-based".

Delo Group owns 100% of Deloports (a grain and container terminal in Novorossiysk) and 30.75% of Global Ports, Russia's largest operator of sea container terminals, acquired by the group in 2018 for 250 million USD. In reply to the question about the possible consolidation of TransContainer with Global Ports Shishkarev pointed out: "Everything conducive to the increase of the company's capitalization is possible."

"We wanted to take the best we have and the best from TransContainer. <…> We hope that we will be able to ‘expand’ all narrow spaces between the operator and the ports of the group by reducing transit time required to pass the border checkpoint, that we will create a unified customer base for clients from anywhere in the world," he added.

"Thanks to Deloports and Global Ports Shishkarev has obvious synergy with the container operator," Mikhail Burmistrov, General Director of INFOline-Analytics, thinks. There are successful examples, like FESCO, which is an operator of port terminals and flatcars, reminds the analyst. Delo Group offers a complex service, however, it has a small fleet of flatcars about 940 vehicles strong. The expert believes that new complex multimodal services can be launched in the first quarter of 2020.

What is known about Sergey Shishkarev?

From its incorporation in 1993 and until 2018 the business of Delo Group was located mostly in Novorossiysk, where Shishkarev was born. The company progressed to "the federal level" after buying a share in Global Ports, Russia's largest port container operator. The businessman ran Delo Group from its incorporation until 1998. From 1999 he was a deputy in the State Duma from Krasnodar Krai for three consecutive convocations. "I think that I worked especially effectively during my third term, when I chaired the transport committee," says the businessman about his career in politics, "I did a lot of good for the industry, including the correct assessment of budget spending." Shishkarev eventually left politics: "I decided to return back to business due to an objective necessity. You see the results of my comeback" (this is his statement made in April in the capacity of a bidder for TransContainer). Earlier the Kommersant newspaper called Shishkarev an ally of Dmitry Rogozin, Director General of Roscosmos. They both used to work in the Maritime Board under the Government. According to the newspaper, it was Rogozin who had lobbied for the businessman's appointment to the Maritime Board. In 2018 Shishkarev left the Board.

Source – RBС dated 27.11.2019