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Published: 4 June 2012      

Summa strengthens its FESCO hand

Sergey Generalov
Summa's purchase of FESCO is expected to be completed on 15 June, the day of FESCO’s AGM

Summa group, the Russian conglomerate with extensive interests from construction to oil trading, is continuing its expansion in the domestic port sector.

According to Russian sources, Summa is planning to buy a 69% stake in FESCO, the country’s largest bulk and general cargo carrier with substantial assets in both the shipping and port sectors, and not 56% as reported by on 20 May. 

Last month Summa acquired 10% of FESCO’s Treasury stock and is about to purchase the remaining 3%. The shares are indirectly owned by FESCO’s chairman Sergey Generalov. Concurrently, the conglomerate has sought the approval of Russia’s Federal Antimonopoly Service to acquire (for US$1B) the 56% stake in FESCO controlled by Generalov directly.

Thus, having earlier gained control (jointly with state-run Transneft) over Novorossiysk Commercial Seaport and, through it, the Baltic port of Primorsk (WorldCargo News, April 2011, p16), Summa is looking to acquire assets on Russia's Pacific coast.

FESCO currently operates 47 ships, and controls both Vladivostok Commercial Seaport, handling mainly containers, metals and autos, and Dalreftrans, Russia’s largest owned reefer container fleet operator. It also has a 50% stake in Troika, the rail transportation joint venture with Russian Railways (RZD). It controls wagon operator Transgarant and has a 21.1% stake in RZD's rail container carrier affiliate, TransContainer.

Summa has already completed due diligence and expects the deal to close on 15 June 2012, the day of FESCO’s annual stockholders’ meeting. The deal is estimated at US$1.4B, which means the whole company would thus be worth US$2B, more than two times its market capitalisation. “The price comprises the market value plus a 30% premium,” said InfraNews agency director Aleksey Bezborodov.

FESCO has been trying for some time to restructure its business, quitting the least profitable segments and focusing on the most promising ones. Earlier this year, the company’s management revealed a plan to dispose of the bulker fleet of 11 ships (plus two more to be commissioned later this year). It also selected NefteTransService (NTS), a private rail oil carrier, as the preferred buyer of TransGarant, which operates 16,800 gondola and special-purpose cars.

Generalov also declared his willingness to sell FESCO’s interest in TransContainer, should RZD keep rebuffing his company’s offer to buy out the state-run controlling stake in TransContainer. This dispute is understood to be the main reason behind Generalov’s decision to sell his entire shareholding in FESCO to Summa.

The FESCO-NTS deal is due to be closed by 3Q/2012, but it is now reported that NTS will be able to buy TransGarant only if FESCO fails to come to terms with Summa on the sale of all its assets, including TransGarant. Otherwise, FESCO will pay NTS a US$25M penalty.

In 2011, FESCO had a turnover of US$1B and its EBITDA was US$225M. Summa’s annual turnover is estimated at around US$10B. According to Russian analysts, Summa has the extra financial and political clout that could prove decisive when TransContainer is privatised.

  • Summa acquired has acquired for around US$30M a 50% minus one share in Russian state-run grain trader United Grain Company (OZK). This gives it a strong hold over all the grain traffic moving over Novorossiysk and also provides access to the grain export channels through Russia’s Far East ports.

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  • Read related items
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  • Europe) Russia) Russia Acquisition and mergers
  • Europe) Russia) Russia Port developments
  • FESCO Transportation
  • NefteTransService
  • Russian Railways
  • Summa Group
  • TransContainer
  • Transgarant
  • United Grain Company
  • Acquisition and mergers
  • Ports and port authorities
  • Russia
  • Ship owners and operators - general cargo

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